2006 (9) TMI 212 - AT - Income Tax

Summary

Issues involved: Appeal by revenue against appellate order u/s 143(1)(a) for assessment year 1996-97 regarding credit for tax deducted at source (TDS) on rental income.

Summary:
The revenue appealed against the order of the Commissioner of Income-tax (Appeals) directing credit for the entire TDS on rental income, despite only one fourth of the income being assessed in the hands of the assessee. The assessee, a co-owner of a property, claimed credit for the full TDS amount based on the certificate issued in his name. The Assessing Officer limited the credit to 1/4th of the TDS, as only 1/4th of the property income was included in the assessee's total income. The assessee argued that the amendment to section 199, effective from 1-4-1997, did not require credit adjustment for co-owners. The Commissioner of Income-tax (Appeals) allowed the claim, directing the Assessing Officer to grant interest on the refundable TDS. The Tribunal upheld the decision, noting that the amendment to section 199 was prospective and the credit should be given to the certificate holder, avoiding denial of refund due to the assessee.

The Tribunal observed that the certificate for TDS was issued in the name of the assessee, although there were multiple co-owners. The amendment to section 199, allowing adjustment of TDS among co-owners, was effective from the assessment year 1997-98 onwards. The Tribunal emphasized that denying full credit to the certificate holder would create an unfair situation for co-owners without certificates. Refusing credit to other co-owners, despite the entire TDS being collected, while the certificate holder is not fully credited, would result in denial of rightful refunds. Therefore, the Tribunal upheld the Commissioner's decision to grant full credit for TDS to the assessee, dismissing the revenue's appeal.