Whether Husband is Entitled To TDS Credit On Interest Earned From Amount Gifted To His Wife?

A careful perusal of sub-rule (2) indicates that where the

income, on which tax has been deducted at source, is assessable in the hands of a person other than deductee, then credit for the

proportionate tax deducted at source shall be given to such other

person and not the deductee. The proviso to sub-rule (2) provides

for deductee filing a declaration with the deductor giving

particulars of the other person to whom credit is to be given. On

receipt of such declaration, the deductor shall issue certificate for

the deduction of tax at source in the name of such other person.

The crux of section 199 read with Rule 37BA(2) is that if the

income, on which tax has been deducted at source, is chargeable

to tax in the hands of the recipient, then credit for such tax will be allowed to such recipient. If, however, the income is fully or

partly chargeable to tax in the hands of some other person because of the operation of any provision, like section 64 in the extant case, the proportionate credit for tax deducted at source should be allowed to such other person who is chargeable to tax in respect of such income, notwithstanding the fact that he is not the recipient of income. It is with a view to regularise the allowing of credit for tax deducted at source to the person other than recipient of income, that the proviso to Rule 37BA(2) has been enshrined necessitating the furnishing of particulars of such other person by the recipient for enabling the deductor to issue TDS certificate in the name of the other person. The proviso to Rule 37BA(2) is just a procedural aspect of giving effect to the mandate of section 199 for allowing credit to the other person in whose hands the income is chargeable to tax. The entire purpose of this exercise of allowing credit to the other person is to ensure that the benefit of tax deducted at source is availed once and that too, by the right person, who is chargeable to tax in respect of such income. It is just to streamline the procedure for giving effect to this intent and rule out the possibility of taking any inappropriate credit for the amount of tax deducted at source, firstly, by the recipient who is not chargeable to tax and secondly, by the person who is rightly chargeable to tax in respect of such income, that the procedural provision has been put in place in Rule 37BA(2). One needs to draw a line of distinction between substantive provision [section 199 read with Rule 37BA(2) without proviso] and the procedural provision [proviso to Rule 37BA(2)]. Non-compliance of a procedural provision, which is otherwise directory in nature, cannot disturb the writ of a substantive provision. {Para 6}

7. Adverting to the facts of the extant case, it is seen that out of

total interest income credited to assessee’s wife as per Form

No.26AS amounting to Rs.39.26 lakh, she included interest from

SBI in her total income to the extent of Rs.1,84,212/-. The

assessee included the remaining interest of Rs.37.42 lakh in his

income because of the applicability of section 64 of the Act. The

assesse and his wife claimed proportionate tax credit, which totals

up to Rs.2,94,474/-. This deciphers that the total interest income

received by the assessee’s wife got taxed partly in her own

assessment and partly in the assessment of her husband, the

assessee in question, as per the mandate of section 64. The

benefit of TDS has also been claimed accordingly. Merely

because the assessee’s wife did not furnish declaration to the bank

in terms of proviso to Rule 37BA(2), the amount of tax deducted

at source, which is otherwise with the Department, cannot be

allowed to remain with it eternally without allowing any

corresponding credit to the person who has been subjected to tax

in respect of such income. As the substantive provision of section

199 talks of granting credit for tax deducted at source to the other

person, who is lawfully taxable in respect of such income, we are

satisfied that the matching credit for tax deducted at source must

also be allowed to him. In view of the fact that the tax of

Rs.2,80,656/- has actually been deducted at source on the interest

income of Rs.37.42 lakh, we hold that the credit for such TDS

should be allowed to the assessee, who has been subjected to tax

in respect of such income. This ground is allowed.

 IN THE INCOME TAX APPELLATE TRIBUNAL

PUNE BENCH, ‘A’ PUNE

BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND

SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER

आयकर अपील सं.

/ ITA No.675/PUN/2022

नधारण वष / Assessment Year : 2021-22

Anil Ratanlal Bohora, Vs. ACIT, Circle-1, Nashik

आदेश / ORDER

PER R.S. SYAL, VP :

Date of pronouncement 19-01-2023

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Whether foreign scholarship given by Advocate amounts to business expense under Income Tax?

 We have carefully considered the rival contention and perused the orders
of the lower authorities. Issue involved in this appeal is whether the
expenditure incurred by the assessee is allowable u/s 37 (1) of the act or
not. Allowability of an expenditure incurred by the assessee u/s 37 (1) of
the act is required to be tested in accordance with nature and scale of
the business/ profession of the assessee. It may be a case that in case
of one assessee, particular expenditure is “ wholly and exclusively “
incurred for the purposes of business and in another case it may not
be so. Undoubtedly, assessee is a noted international lawyer who has
set up a scholarship for creating his visibility in international arena
and his social standing. The assessee has specifically submitted that it
has increased lot of value of the CV of the assessee and the government
of Singapore has appointed him on certain committees of repute. Even
otherwise, it is not open to the revenue to adopt a subjective standard of
reasonable as and decide whether the type of the expenditure of the
assessee should incur and in what circumstances. The opinion of the
learned assessing officer that attending the conferences et cetera would
have added more weightage to the professional profile of the assessee is
devoid of any merit. It is not the AO but the assessee is carrying on the
profession. He knows better that what kind of expenditure he should
incur for furtherance of his business. To judge allowability of an

expenditure, the learned assessing officer should put himself into the
shoes of the assessee and then decide that whether the expenditure
incurred by the assessee is necessary or not for the business of the
assessee. Thus, allowability of expenditure should always be judged
from the mindset of the assessee. The AO cannot put his thinking to say
that the expenditure incurred by the assessee is not wholly and
exclusively incurred for his profession, unless, he brings his level of
thinking to the level of the professional, like assessee. The requirement
of incurring the expenditure by a professional/businessman changes by
the changes in the dynamics of the business, its complexities and its
uniqueness. The level at which the assessee is carrying on the
profession, perhaps, he might not have thought it proper to increases
visibility by attending the conferences, seminars et cetera. He has
different vision of carrying himself in the professional field to increases
visibility and social status. He thought fit to set up a scholarship to
Indian students in Oxford University. Thus, in the present case
definitely there is a nexus between the expenditure incurred by the
assessee and the professional services rendered by the assessee. He has
also shown that the student to moving the scholarship has been granted
has helped him in famous case of Vodafone represented by him.
Therefore, we are of the opinion that the assessee has incurred the above
expenditure wholly and exclusively for the purposes of the business. In
the professional field there are innovative ways visualized by the
professional to make themselves visible in the professional circle and to
build their own professional profile for generating higher and valueadded
business. It may be, sponsoring a seminar, becoming knowledge
partners, setting up the prizes and awards, creating the competitive
award ceremonies, hosting vibrant summits of various states. Therefore,
it is apparent that at least in the case of the professionals, the way they
promote themselves, is changing very fast and the benefits of such

expenditure are huge and wide. Therefore according to us the impugned
expenditure incurred by the assessee is a revenue expenditure allowable
u/s 37 (1) of the income tax act. We do not subscribe to the view of the
learned CIT – A these expenditure is capital in nature. The expenditure
incurred by the assessee is the routine day-to-day expenditure incurred
by the assessee for promoting his professional profile. These expenditure
cannot be held to be capital expenditure in nature as no fresh new fixed
assets is created by paying the scholarship sum. Further merely
because in the agreement it is mentioned as an annual gift in the form of
scholarship, it does not become a gift. In fact, it is the expenditure
incurred by the assessee in furtherance of his business. 

INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “F ”: NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 2285/Del/2016 ( By Assessee)
&
ITA No. 2392/Del/2016 ( By AO)
(Assessment Year: 2011-12)
Shri Harish Narinder salve  vs The Assistant Commissioner
of Income tax

Date of pronouncement 13/08/2019
O R D E R
PER PRASHANT MAHARISHI, A. M.

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