Entire TDS credit allowed to the joint owner of the property in whose account entire sale consideration was received
In a recent judgment ITAT Bangalore allowed the entire TDS credit to the joint owner of the property in whose account entire sale consideration was received as the co-owners separately offered income and paid the their taxes.
ABCAUS Case Law Citation:
4560 (2025) (05) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the action of the CPC by not providing the credit of entire TDS on sale of property.
The appellant assessee was an individual. The assessee, after the death of her husband, inherited a house property along with 4 sons and a daughter. As per Muslim religious practice the property was inherited in following ratio among the legal heirs.
| Relation | Ratio |
| The wife (appellant) | 12.50 |
| Four Sons @ 19.44% each | 77.76 |
| One Daughter | 9.74 |
During the year under consideration, the impugned house property was sold for a consideration of Rs. 2 crores. The appellant assessee claimed that entire sale consideration was received in her bank account only after deduction of TDS amounting to Rs. 2 Lakh only in her name only.
As per the assessee, she computed the capital gain on the sale of the property along tax liability and the liability was distributed among the legal heirs in their inheritance ratio. Accordingly, individual tax liability was paid through payment of advance tax. The other legal hoers made full payment of their tax liability without claiming the credit of TDS. Therefore, the entire TDS credit was claimed by her in the return of income.
However, the return of income of the assessee was processed by the CPC and the intimation order under section 143(1) of the Act was generated whereby the CPC accepted the returned income but allowed the claim of TDS credit only to the proportion of capital gain offered by the assessee. Thereby, the CPC disallowed the claim of TDS credit for the balance amount.
The aggrieved assessee preferred an appeal before the learned CIT(A) who dismissed the assessee’s appeal by holding that though the deductor had deducted the TDS in the name of the appellant however, the income to the extent of 87.5% of sale consideration was assessable in the hands of other co-owners. As per Rule 37BA(2) specifically provides for such kind of scenario. As the total deduction has been incorrectly made in the name of the appellant, she was required to file a declaration with the deductor for issuing the certificates in the name of the correct deductees. Furthermore, section 199 read with Rule 37BA specifically provides for giving credit for the tax deducted at source to the extent the corresponding income is offered to tax. There was no infirmity in the order of the AO, CPC restricting the TDS credit in accordance with provisions of section 199 r.w.r. 37BA.
Before the Tribunal, the assessee submitted that CPC failed to appreciate that the other legal heirs had paid advance tax on their respective capital gains. It was contended that the assessee had received the entire sale consideration in her bank account as a condition of sale by the buyer, who accordingly deducted TDS under section 194IA of the Act and issued the TDS certificate in her name. The assessee had computed the capital gains on the property and paid advance tax on behalf of other legal heirs as well. The remaining net amount after tax was distributed to each legal heir.
Based on these facts, the assessee asserted that the appellant rightly claimed the credit for the entire TDS amount against her tax liability, and the same should be allowed in full, since the entire transaction and tax responsibility initially rested with her before being equitably settled among the heirs.
The Tribunal noted that it was undisputed that the entire sale consideration was deposited into the bank account of the assessee, and the TDS was deducted and reflected in her name alone. This arrangement was in consequence of the buyer’s condition, and the deduction of TDS was appropriately made under section 194-IA of the Act. The assessee, in turn, discharged the capital gains tax liability in full, not only for herself but also on behalf of the other legal heirs, followed by appropriate distribution of the net proceeds.
The Tribunal further observed that advance tax payments were made by the co-owners towards their respective shares, clearly evidencing that the income has been duly offered to tax in accordance with their respective ownership ratios.
The Tribunal further observed that Rule 37BA(2) read with section 199 of the Act, while governing the apportionment of TDS credit, also mandates that the credit shall be given to the person in whose name the deduction is made, provided the income is assessed accordingly.
The Tribunal noted that in the instant case, the revenue had not disputed the correctness of income offered or the tax paid by the other legal heirs. In such a scenario, the denial of full TDS credit to the assessee merely on technical grounds, especially when she bore the initial tax burden and complied in substance with the law, cannot be sustained.
The Tribunal directed the department to allow the credit for the entire TDS amount as claimed. Accordingly, the order of the CIT(A) was set aside, and the ground of appeal of the assessee was allowed.
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