1. This is an appeal preferred by the revenue in the case of Shri T.G.Veeraraghavan, 170, Rainbow Drive, Opp. Wipro Corporate Office, Bangalore-560 035 against the appellate order dated 27-01-2005 of Commissioner of Income-tax (Appeals)-II, Kochi, for the assessment year 1996-97.
The learned Commissioner of Income-tax (Appeals) erred in directing to give credit for the entire T.D.S. even when only one fourth of the rental income is assessed in the hands of the assessee. The learned Commissioner of Income-tax (Appeals) failed to note that proportionate income as per proviso to Section 199.
3. The brief facts of the case are that the Shri Shri T.G.Veeraraghavan, a resident individual, filed his return of income on 31-12-1997 declaring total income of Rs. 1,90,810/-, for the assessment year 1996-97. While working out the refund due to the assessee amounting to Rs. 1,85,875/-, the assessee claimed a sum of Rs, 2,31,069/- towards tax deducted at source. This return was processed under Section 143(1)(a) and an intimation was issued on 26-2-1999.
While computing the refund due to the assessee, the assessing officer limited the claim of tax deducted at source at 1/4th of the total claim. The assessing officer limited the assessee's claim of tax deducted at source to 1/4th since the assessee included only 1/4th of property income as his share in the total income. The assessee filed a rectification application dated 4-6-1999 requesting to rectify that part of the intimation relating-to the credit given for the tax deducted at source. The main contention of the assessee was that the amendment to Section 199 took effect only from 1-4-1997 relevant to the assessment year 1997-98 and therefore the credit for tax deducted at source need not be considered in the hands of the joint owners and credit should be given for the entire amount in the hands of the person in whose name tax deducted at source certificate was issued (in this case, the assessee). It was further contended before the assessing officer, that the tax deducted at source certificate had been issued by the tenant in favour of the assessee only who received it for and on behalf of the co-owners also and that since the assessee being one of the co-owners, he was liable only for 1/4th share in the property income and was liable to be assessed only for his share of gross rent received. It was further argued that the co-owners also filed return of income declaring their share of income relating to the property and paid taxes, if any, due thereon. However, the assessing officer was of the view that it was to be seen that the principles of taxation relating to income chargeable to tax during an assessment year has been discussed in various provisions of the Income-tax Act, 1961, and that the provisions relating to tax deducted at source mentions income, receipt or payment relevant to an assessment year in which such income, receipt or payment is assessable in the hands of an assessee/persons entitled to receive the inc0mereceipts and payments. According to him, it would be seen there from that the income, receipts or payments referred to therein is the income etc. included in the total income of an assessee from varous heads of ir ;ome and accordingly credit for tax deducted at slouch as per Section 199 has also to be considered in relation to the income etc. includible In the total income of an assessee. Thus, acording to him, it would be seen that even prior to the amendment to Section 199, credit for tax deducted at source should have been considered only on the basis of the inclusion of the income etc. in the hands of an assessee. Admittedly, according to him, in this case the assessee is only a co-owner of the property, the income there from could have been considered only under Section 26 of the Income-tax Act, 1961, and thus, it would be seen that the share income from the property has to be admitted by each co-owner and the share of tax deducted at source should also have been claimed by each of them. The assessing officer also has noted that the co-owners have not filed any return of income under Section 139 or under any other provisions of the Act admitting the share of property income and paid tax as defined under Section 2(43) of the Income-tax Act, 1961. According to him, it would be again seen that the provisions of the Voluntary Disclosure of Income Scheme, 1997 permitted an assessee to disclose undisclosed income and pay the prescribed rate of tax under the Scheme, which was independent of the provisions of the Income-tax Act, 1961 and this again would show that while paying the tax under Voluntary Disclosure of Income Scheme, 1997, the assessees were not entitled to claim credit for pre paid taxes. Since the assessee had not admitted the entire property income in his hands, the assessee was not entitled to claim credit for the entire tax deducted at source as per the certificate issued by the lessee, according to the assessing officer. Since the assessee had admitted only his share of income from the property income, the assessee was entitled to claim credit for tax deducted at source only to the extent of such share of income assessed in his hands based on Section 199 of the Act Thus the assessing officer rejected the petition filed under Section 154 of the Act, by the assessee.
4. Aggrieved, the assessee moved the matter in appeal before the first appellate authority before whom similar submissions as made before the assessing officer were made. It was reiterated before the Commissioner of Income-tax (Appeals) that there was no specific provision in Section 199 of the Act, till the assessment year 1996-97 and such the provision enabling adjustment of proportionate share of tax deducted at source relatable to income from jointly owned property was brought into effect specifically only from assessment year 1997-98. It was further pleaded that the action of the assessing officer in having adjusted only the proportionate share of tax deducted at slouch in the hands of the assessee has the effect of reducing the refunc actually due to the assessee and has led to an anomalous situat on as under: (a) neither the assessee holding the certificate under Section 203 got the credit for the entire tax deducted; (b) nor are the other co-owners not possessing the certificate in their favour entitled to the credit in the absence of such a certificate.
The Commissioner of Income-tax (Appeals) after considering the submissions of the learned representative of the assessee in the light of the facts and circumstances of the case, allowed the claim of the assessee by directing the assessing officer to grant interest also on the refundable tax deducted at source to which the appellate had not been granted credit, as per the provisions of the law. Now the revenue is on appeal before the Tribunal with the ground of appeal extracted as above.
5. At the time of hearing the learned departmental representative reiterated the contents of the order under Section 154 (which has been extracted elsewhere of this order) as her submissions. She specifically drew my attention to para. 5 of the 154 order passed by the assessing officer. She also pleaded that the other co-owners had not voluntarily filed any return admitting the share of property income and only they have availed the benefit under Voluntary Disclosure of Income Scheme, 1997 and hence they could not claim the proportionate tax deducted at source made on the rental income, by the lessee. On the other hand, the learned Counsel for the assessee apart from reiterating the very same submissions made before the authorities below, submitted that the co-owners subsequently declared the same income under Voluntary Disclosure Income Scheme and not claimed their share of tax deducted at source. He also placed on record a Xerox copy of the notes on clauses reported in 220 ITR 216 (Statute) and drew my attention to Clause 48 seeking the amendment to Section 199 of the Income-tax Act relating to credit for tax deducted. He pleaded that why the amendment was brought in is important. Adverting to the Clause 48, he pleaded that these amendments adjusting proportionate tax deducted at source has been inserted only with effect from 1-4-1997 relevant to the assessment year 1997-98 and the assessee's case falls for the assessment year 1996-97, during the assessment year such provision was not available in the Act.
He further pleaded that when there is a doubt either as to adjusting proportionate tax deducted at source in the hands of the co-owners or not, applying the decision of the Apex Court in the case of Vegetable Products reported in the case of Commissioner of Income-tax v.Vegetable Products Ltd. reported in 88 ITR 192, the issue should be decided in favour of the assessee.
6. I have heard rival submissions and considered the facts and materials on record. There is 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 is also no dispute about the fact that the other co-owners have not claimed the credit of their share of tax deducted at source. It is 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 has 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 with prospective but not retrospective effect. In these facts and circumstances I find that the lessee has issued certificate for tax deducted at source under Section 194(1) deducting the tax of Rs. 2,25,000/- in the name of the assessee, Shri T.G. Veeraraghavan, even though he was only a co-owner. Before the amendment to Section 199, which was brought into the statute book with effect from the assessment year 1997-98, normally credit for tax deducted at source was given to the person in whose name the certificate was issued. As rightly pointed out by the learned Counsel for the assessee before the Commissioner of Income-tax (Appeals) if such full credit is not given to the assessee, who is holding the certificate, an anomalous situation would arise as under: (a) neither the assessee holding the certificate under Section 203 got the credit for the entire tax deducted; (b) nor are the other co-owners not possessing the certificate in their favour entitled to the credit in the absence of such a certificate.
It is 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 T.D.S into its treasury, so long as the assessee is holding a certificate for t e entire tax deducted at source in his name. So long as the assesee is having a certificate in his name for the amount higher than the ax 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. In this view of the matter, I do not find infirmity in the order of the first appellate authority and as such I confirm the same.