By TIOL News Service

HYDERABAD, APRIL 07, 2017: THE ISSUE IS - Whether a partnership firm can be estopped from claiming TDS credit as per Section 199 & Rule 37BA of I-T Act, merely because the aforesaid amount is not reflected in Form 26AS. NO is the answer.

Facts of the case:

The assessee, a firm, had filed its return for the A.Y 2013-14, declaring total income at 1,16,976/-, mainly comprising property income and claimed TDS of Rs. 59,189/-. The AO though accepted the income declared, however he did not give credit to the TDS amount on the reason that the same was not reflected in Form 26AS. Before the CIT(A), the assessee contended that it was a partnership firm and all the partners were holding the property and since, the tenant Bank deducted tax and uploaded the said amount in the name of partners, the TDS could not get reflected against the firm but was reflected in the name of individual partners. Since, the entire income was shown in the hands of the firm, the TDS also ought to have been given credit in the hands of the firm. The CIT(A) however, rejected the claim by stating that legally the property belonged individually to partners. Further the Union Bank of India, i.e., the Tenant had deducted the TDS in favour of the owners. Had the property been transferred only, then the firm could have claimed TDS in its name. The Partnership Deed submitted by the applicant did not refer to ownership of the referred property and the TDS certificate could not be changed in favour of some other person or firm.

On appeal, the ITAT held that,

++ it is seen that the AO as well as CIT(A) ignored the provisions of Section 199 of the I-T Act and Rule 37BA there on. The reason given by the CIT(A) in rejecting Assessee contention is also not proper. The basic issue is not whether the property is owned by the firm or not, but whether the income was declared or not. Admittedly, the property belonging to individual persons has been pooled into the firm and accordingly, it became an asset of the partnership. The firm cannot own property in its name. Generally they are in the name of managing partners or in the name of individual partners. Since the AO accepted the income in the hands of the firm, as per the provisions of Sec. 199 of the IT Act, the credit of tax deducted has to be given in the hands of the firm. In case the amount is not reflected in form 26AS, the same should not be prevent Assessee claiming the deduction as per provisions of Sec. 199 of the IT Act and Rule 37BA which clearly provides the methodology for giving credit. The A.O is directed to allow the credit in the hands of the firm, after due verification.

(See 2017-TIOL-443-ITAT-HYD)