Deduction of tax at source - Amendment to section 199

IN THE ITAT COCHIN BENCH Income-tax Officer, Ward-2(1), Ernakulam v. T.G. Veeraraghavan Section 199 of the Income-tax Act, 1961 - Deduction of tax at source - Credit for tax deducted - Assessment year 1996-97 - Whether amendment to section 199, permitting to adjust tax deducted at source (TDS) proportionately in hands of co-owners had been brought in statute book only with effect from assessment year 1997-98, with prospective effect - Held, yes - Whether before said amendment, normally credit for TDS was given to person in whose name TDS certificate was issued - Held, yes - Whether so long as assessee is having a certificate in his name for amount higher than tax due to be paid by him, excess tax is to be refunded to him - Held, yes - Assessee was one of four co-owners of property given on lease - In respect of rent paid, lessee deducted tax at source and issued a certificate for entire TDS in name of assessee - Whether for relevant year, assessee was entitled to full credit of TDS on basis of said certificate, even though he had included only one fourth of rental income in his total income - Held, yes Facts The assessee along with three more co-owners was receiving rent from certain property. In respect of the rent paid, the lessee deducted tax at source and issued the certificate for entire tax deducted at source (TDS) in the name of the assessee. The assessee filed his return claiming refund of the amount towards TDS. The Assessing Officer, however, restricted the same to one-fourth on the ground that the assessee had included only one fourth of rental income as his share in his total income, and, therefore, in terms of section 199, the assessee was entitled to claim credit for TDS only to the extent of such share of income as assessed in his hands. On appeal, the assessee contended that there was no specific provision in section 199 till the assessment year in question and such a provision, enabling adjustment of proportionate share of TDS relatable to income from jointly owned property, was brought into effect specifically only from the assessment year 1997-98. The Commissioner (Appeals) accepted the assessee’s claim and directed the Assessing Officer to give full credit of the TDS along with interest. On revenue’s appeal : Held There was no dispute about the fact that there were four co-owners receiving the rent but the certificate for tax deducted at source was issued in the name of the assessee only. There was also no dispute about the fact that the other co-owners had not claimed the credit of their share of tax deducted at source. It was also not disputed that the amendment to section 199 permitting to adjust the tax deducted at source proportionately in the hands of the co-owners had been brought in the statute book only with effect from the assessment year 1997-98. In other words, the amendment has been brought into the statute book with prospective effect. The lessee had issued certificate for tax deducted at source under section 194(i) deducting the tax of Rs. 2,25,000 in the name of the assessee, even though he was only a co-owner. Before the amendment to section 199, normally credit for tax deducted at source was given to the person in whose name the certificate was issued. The assessee rightly pointed out before the Commissioner (Appeals), that if such full credit was not given to the assessee, who was holding the certificate, an anomalous situation would arise, viz., (a) neither the assessee holding the certificate under section 203 would get the credit for the entire tax deducted; (b) nor would the other co-owners not possessing the certificate in their favour be entitled to the credit in the absence of such a certificate. It was not fair on the part of the department also to say that it would not give credit to anybody in respect of the tax deducted at source in respect of the remaining co-owners, even after taking the entire TDS into its treasury. So long as the assessee is having a certificate in his name for the amount higher than the tax due to be paid by him, the excess tax is to be refunded to the assessee. If credit was not given for the entire amount mentioned in the certificate, it would definitely amount to denial of the refund due to the assessee. Therefore, there was no infirmity in the order of the Commissioner (Appeals) and as such the same was to be confirmed. [Para 6] In the result, the appeal was to be dismissed. [Para 7]