Taxpublishers.in - Monday Corner Answer to the Quiz for the week (22 Jan 2024)

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Quiz for the week (22 Jan 2024): Dinesh (age 56) is a resident and ordinarily resident. He sold a vacant urban land for Rs.270 lakhs as power of attorney holder. The land was owned equally by his 2 brothers and 1 sister. The buyer being a domestic company deducted tax at source in the name of Dinesh out of the sale proceeds which is reflected in Form No.26AS / AIS. State how Dinesh should proceed further in the matter. Best Answer : Section 199(3) empowers the CBDT to make rules for the purpose of giving credit of tax deducted at source to a person other than the person in whose name it was deducted at source by the payer. Consequently, CBDT has inserted rule 37BA to provide the mechanism for giving such TDS credit to persons other than the person in whose name it was originally deducted and remitted. Rule 37BA (2) of Income-tax rules, 1962 is applicable in the instant case. Rule 37BA (2) says that where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax at source. The declaration filed by the deductee shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred above and shall keep the declaration in his safe custody. Applicability of the Rule: In the instant case, the income tax has already been deducted at source by the domestic company, in the name of Dinesh, from the sale proceeds of vacant urban land. Accordingly, TDS is reflected in Form No.26AS of Dinesh. Dinesh, being a POA holder, must immediately proceed in accordance with Rule 37BA (2) of the Income tax Act, 1961. He must give a declaration to the payer (deductor) with the details of 2 brothers & a sister (who own the land equally) as specified in Rule 37BA(2) and get the TDS return (already if filed, revised) so that proportionate TDS amounts are correctly credited to the PAN of the said 2 brothers & a sister. Once the TDS amounts are correctly reflected in Form No.26AS of the aforesaid siblings, the responsibility of Dinesh would end. In case, he is the powerholder not only for sale of land but also for filing the ITR, he should the needful in this regard. It may be noted that the declaration must be with the requisite details as narrated above and there is no prescribed format provided for the same in the Income-tax rules, 1962. PRASHANTH.G, MYSURU

Quiz for the week (22 Jan 2024):

Dinesh (age 56) is a resident and ordinarily resident. He sold a vacant urban land for Rs.270 lakhs as power of attorney holder. The land was owned equally by his 2 brothers and 1 sister. The buyer being a domestic company deducted tax at source in the name of Dinesh out of the sale proceeds which is reflected in Form No.26AS / AIS. State how Dinesh should proceed further in the matter.

Best Answer :

Section 199(3) empowers the CBDT to make rules for the purpose of giving credit of tax deducted at source to a person other than the person in whose name it was deducted at source by the payer. Consequently, CBDT has inserted rule 37BA to provide the mechanism for giving such TDS credit to persons other than the person in whose name it was originally deducted and remitted.

Rule 37BA (2) of Income-tax rules, 1962 is applicable in the instant case. Rule 37BA (2) says that where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee:

Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax at source.

The declaration filed by the deductee shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.

The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred above and shall keep the declaration in his safe custody.

Applicability of the Rule: In the instant case, the income tax has already been deducted at source by the domestic company, in the name of Dinesh, from the sale proceeds of vacant urban land. Accordingly, TDS is reflected in Form No.26AS of Dinesh. Dinesh, being a POA holder, must immediately proceed in accordance with Rule 37BA (2) of the Income tax Act, 1961. He must give a declaration to the payer (deductor) with the details of 2 brothers & a sister (who own the land equally) as specified in Rule 37BA(2) and get the TDS return (already if filed, revised) so that proportionate TDS amounts are correctly credited to the PAN of the said 2 brothers & a sister. Once the TDS amounts are correctly reflected in Form No.26AS of the aforesaid siblings, the responsibility of Dinesh would end. In case, he is the powerholder not only for sale of land but also for filing the ITR, he should the needful in this regard. It may be noted that the declaration must be with the requisite details as narrated above and there is no prescribed format provided for the same in the Income-tax rules, 1962.

PRASHANTH.G,
MYSURU