Facts of the Case

The assessee, Jerambhai Ratnabhai Patel, along with his wife and son, sold an immovable property comprising residential and commercial units situated at Omkar Complex, Bhavnagar, Gujarat. The registered sale deeds reflected legal ownership of the units in the names of the assessee’s wife and son, who were also the sole parties to the agreement for sale.

The assessee filed his return of income for Assessment Year 2022-23 declaring capital gains arising from sale of certain units and claimed refund after adjusting TDS credit of ₹9,82,156, relying on a family arrangement dated 12.09.2014 which allegedly granted him exclusive rights in the ground floor and first floor units. The return was processed under Section 143(1) by CPC, which denied the TDS credit. The CIT(A) upheld the denial. Aggrieved, the assessee appealed before the Tribunal.

Issues Involved

Whether TDS credit under Section 199 read with Rule 37BA could be allowed to the assessee when the registered sale deeds and TDS certificates were in the names of his wife and son, whether an unregistered family arrangement could override registered ownership and sale documentation, and whether the CPC and CIT(A) were justified in denying the TDS credit and refund.

Petitioner’s Arguments

The assessee contended that pursuant to a family arrangement dated 12.09.2014, he had exclusive rights over the ground floor and first floor units and accordingly offered capital gains arising from sale of those units in his return. It was argued that TDS credit pertaining to those units should be granted to him in terms of Section 199 read with Rule 37BA, notwithstanding the fact that TDS was deducted in the names of his wife and son.

Respondent’s Arguments

The Revenue submitted that the family arrangement relied upon by the assessee was unregistered and expressly stated that the assessee would have no right, title or interest in the land except as permitted by his wife and son. It was contended that the assessee was not a party to the registered sale deeds and was not even a confirming party to the sale agreement. Since the purchaser deducted TDS in the names of the legal owners, credit could be granted only to them and not to the assessee.

Court Order / Findings

The ITAT Ahmedabad observed that the family arrangement dated 12.09.2014 was unregistered and did not confer any enforceable ownership rights upon the assessee. The Tribunal noted that the registered sale deeds and the agreement for sale were executed solely by the assessee’s wife and son, and the assessee was neither an owner nor a confirming party.

The Tribunal held that TDS credit under Section 199 can be granted only to the person in whose hands the income is assessable and in whose name the tax has been deducted. Since the purchaser deducted TDS in the names of the assessee’s wife and son, the assessee was not entitled to claim such credit. However, the Tribunal directed the Revenue to grant TDS credit to the wife and son of the assessee after due verification, permitting them to seek appropriate relief by filing revised returns with approval under Section 119(2)(b).

Important Clarification

The Tribunal clarified that unregistered family arrangements cannot override registered ownership documents for the purpose of granting TDS credit. Credit under Section 199 read with Rule 37BA must strictly follow legal ownership and the name in which tax has been deducted.

Final Outcome

The appeal filed by the assessee was dismissed. The denial of TDS credit and refund to the assessee was upheld, with a direction to the Revenue to allow TDS credit in the hands of the assessee’s wife and son after verification in accordance with law.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769061912_JERAMBHAIRATNABHAIPATELAHMEDABADVS.CPCBANGALOREPRESENTJURISDICTIONTHEITOWARD512AHMEDABAD.pdf

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