Rule 37BA to be treated as retrospective in nature

It has recently been held by the Hon’ble J. Mahavir Singh of ITAT Kolkata in the case of Parmanand Tiwari vs. ITO, Wd-54(1), Kolkata, I.T.A No.2417/Kol/2013, that the Rule 37BA as amended by the Amendment Rules, 2009 w.e.f. 01.04.2009 is retrospective in nature.

Brief facts leading to the above appeal were as follows:

The assessee Mr. Parmanand Tiwari was a professional Chartered Accountant and was a partner of the firm M/s. Tiwari & Co. having PAN – AACFT6997P which was dissolved w.e.f. 30.12.2006. Thereafter the assessee became the proprietor of this firm w.e.f. 30.12.2006.
The assessee during the assessment proceedings filed his e-return on 29.09.2008 for the Assessment Year 2008 – 09 i.e. the relevant assessment year. The Assessing officer after going through the particulars of the TDS certificates observed that all the TDS certificates were issued in the name of M/s. Tiwari & Co. having PAN: AACFT6997P, which was that of the partnership firm and not of the individual. During the assessment proceedings, the assessee was asked to produce statement of professional receipts for the claim of TDS.
The assessee stated that the credit was claimed by him in favour of M/s. Tiwari & Co. due to the fact that M/s. Tiwari & Co. became a proprietorship concern but earlier it was a partnership firm which got discontinued w.e.f. 30.12.2006. The assessee relied on the provisions of section 37BA of the Income Tax Act.
The assessee stated that before the Assessing officer that M/s. Tiwari & Co. declared that the income on which tax was deducted at source for AY 2008-09 was assessable in the hands of the individual assessee other than the deductee and credit for such TDS should be given to him because income on account of TDS is includible in the assessment proceedings of him being the individual assessee.
The assessee contended that he already included the said total income in his return and accordingly, the credit for TDS shall be allowed to him as per Rule 37BA. The claim was disallowed upon observing the provisions of Rule 37BA as inserted by the Sixth Amendment Rules w.e.f. 01.04.2009 and hence, the credit in the hand of individual assessee cannot be allowed.
Being aggrieved by the said order, the assessee filed an appeal before the Tribunal.

The judgment passed by the Tribunal:

It was held that after hearing the Ld. Senior counsel for the Revenue and after going through facts and circumstances of the case, that there was no dispute regarding the facts of the case. The assessee was a Chartered Accountant by profession running the partnership firm M/s. Tiwari & Co. from the year 1983. The partnership firm got dissolved w.e.f. 30.12.2006 and the assessee became proprietor of the firm. The assessee included the income from TDS certificates issued in the name of M/s. Tiwari & Co. and claimed the credit for TDS in the individual capacity. The assessment was completed and the total income of the firm M/s. Tiwari & Co. was included but the credit for TDS at Rs.1,53,380/- was not allowed as the TDS credit was not reflected in the PAN of the assessee in his individual capacity. During the assessment proceedings, the assessee submitted declaration stating that the income of M/s. Tiwari & Co. has been included in the hands of its proprietor and should be assessed in the hands of the assessee M/s. Tiwari & Co. under whom TDS has been deducted.
After going through the facts it was found that there was only a technical breach. It was further held that wrong submission of PAN by deductors cannot debar the assessee from claiming of TDS deducted when the income is included in his hands. It was stated that the legislature has amended section 37BA of the Act by the Amendment Rules, 2009 w.e.f. 01.04.2009.
In the Rule 37BA it has clearly been mentioned that credit for TDS and paid to the Central Government shall be given to the person if the deductee files a declaration with the deductor and the deductor reports the same in the name of the other person in the information as referred to in Rule 37BA(1) of the Rules. Moreover Rule 37BA(3) provides that for the purpose of giving credit for tax deducted according to Chapter XVII for giving credit to a person other than those referred to in Rule 37BA (1) and also the assessment year in which such credit may be given.
In view of the provision of section 37BA and the provisions of section 199(1) of the Income Tax Act, the credit for tax deduction should be given to the person from whom tax has been deducted. The Rule as amended by the Amendment Rules, 2009 makes it clear that the credit should be given on the basis of the information provided by the deductor.
Rule 37BA(2) of the Rules aims to lessen the hardship faced by assessees for claiming credit of TDS where the deductee files a declaration before the deductor and the deductor reports the deduction in the name of other person in the information relating to the deduction of tax as referred to in sub-rule (1) of Rule 37BA.
It was held that the assessee should have been allowed credit for TDS in the given facts of the case. The only issue was that whether the amended Rule as amended by Amendment Rules, 2009 is a beneficial provision and whether the same can be declared as retrospective which would apply to all pending cases.
Similar issue was dealt by the Hon’ble Apex Court in Allied Motors Pvt. Ltd. vs. CIT (1997) 224 ITR 677 (SC), wherein it was held that the provisions of the first proviso to Rule 37BA is remedial in nature, framed to lessen the hardship to the assessee, has to be treated as retrospective in nature.
In such circumstances, the Tribunal directed the Assessing Officer to allow the credit of TDS after verifying declaration by the deductee according to the proviso to Rule 37BA (2) of the Rules. In terms of the above, the appeal of assessee was allowed.