TDS credit reflected in a trustee’s name but pertaining to a trust’s income should be granted to the trust if the money was credited to the trust’s account.

By | July 7, 2025
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TDS credit reflected in a trustee’s name but pertaining to a trust’s income should be granted to the trust if the money was credited to the trust’s account.

Issue:

Whether an assessee-trust can be granted credit for Tax Deducted at Source (TDS) under Section 199 of the Income-tax Act, 1961, when the TDS is reflected in the name of a trustee (H), but the trust claims that the underlying money was credited to the trust’s account and the TDS was not claimed by the trustee.

Facts:

  • For Assessment Years 2020-21 to 2022-23, the assessee-trust filed its return claiming a refund of TDS.
  • The intimation under Section 143(1) was passed, and the claim for TDS credit was not allowed.
  • The assessee filed a rectification application for the TDS credit.
  • Subsequently, the assessee filed a grievance application, which was closed, and the assessee’s claim for credit of TDS was rejected, leading to a demand being raised.
  • The Commissioner (Appeals) dismissed the appeal, citing both delay and observing that the closure of a grievance application was not an appealable order.
  • The assessee’s core claim was that the TDS deducted was reflected in the name of H, who was a trustee of the trust.
  • The assessee contended that this TDS was not claimed by H (the trustee), and therefore, the trust should be given credit for it.

Decision:

The court held that the matter was to be remanded to the Assessing Officer (AO). The AO was directed that if the credit of TDS was in the name of the trustee (H), and if the trust provided details that the money (from which TDS was deducted) was credited by the trustee into the account of the trust, then the same should be taken into account, and due credit for the TDS should be given to the assessee-trust accordingly.

Key Takeaways:

  • Section 199 – Credit for TDS: Section 199 provides for giving credit for tax deducted at source. The fundamental principle is that TDS credit should be given to the person in whose hands the income, on which TDS was deducted, is ultimately assessable.
  • Rule 37BA of Income-tax Rules: Rule 37BA (specifically Rule 37BA(2)) allows for the transfer of TDS credit to a person other than the deductee (the person in whose name TDS is deducted) if the income is assessable in the hands of that “other person.” This typically requires a declaration from the deductee and proper reporting by the deductor.
  • Trust vs. Trustee – Assessability of Income: A trust is a distinct legal entity (though often assessed as an AOP). Income derived by a trust is assessable in the hands of the trust (or its beneficiaries, depending on the type of trust). If the income (from which TDS was deducted) belongs to the trust and is assessable in the trust’s hands, then the TDS credit should be given to the trust, even if the Form 26AS initially shows the TDS in the trustee’s name.
  • Substance Over Form: The court’s direction emphasizes looking at the substance of the transaction. If the income truly belongs to the trust and the trustee merely facilitated the transaction or held the account in their name for the benefit of the trust, the TDS credit should follow the income.
  • Conditions for Transfer of Credit: The conditions laid down by the court are pragmatic:
    1. TDS is in the name of the trustee.
    2. The trust provides details that the underlying money was credited by the trustee into the account of the trust.
    3. Implicitly, the trustee has not claimed the TDS credit themselves (as stated in the facts).
  • Remand for Factual Verification: The matter is remanded to the AO for factual verification, specifically to ascertain if the money was indeed credited to the trust’s account by the trustee, thereby establishing the link between the TDS, the income, and the trust.
  • “In favour of assessee”: This provides significant relief to the assessee-trust by giving them an opportunity to claim legitimate TDS credit, which was previously denied on technical grounds. It addresses the practical difficulty faced by trusts where income might be received in a trustee’s name but belongs to the trust.
IN THE ITAT AHMEDABAD BENCH ‘SMC’
Urmilaben H. Dave Disc Family Trust
v.
Income-tax Officer
DR. BRR KUMAR, Vice President
and Ms. Suchitra Kamble, Judicial Member
IT Appeal Nos. 326, 327 & 328 (Ahd.) of 2025
[Assessment years 2020-21 to 2022-23]
MAY  30, 2025
Himanshu Shah, A.R. for the Appellant. Ravindra, Sr. D.R. for the Respondent.
ORDER
Ms. Suchitra Kamble, Judicial Member.- These three appeals are filed against the order dated 31-07-2024 passed by CIT(A)/Addl/JCIT(A)-9, Mumbai for assessment years 2020-21, 2021-22 & 2022-23.
2. The grounds of appeals are as under:-
ITA No. 326/Ahd/2025 A.Y. 2020-21
“1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts.
2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has erred in holding that appeal was filed late and therefore, he did not condone alleged delay. It is submitted that appeal was filed in time. Appeal was filed on 29/05/2024 against rejection of our grievance on 23/04/2024 and received by us on 30/04/2024.
3. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in not granting credit of TDS amounting to Rs 35,493.
4. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in raising demand of Rs 5,467.
5. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time.”
ITA No. 327/Ahd/2025 A.Y. 2021-22
“1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts.
2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has erred in holding that appeal was filed late and therefore, he did not condone alleged delay. It is submitted that appeal was filed in time. Appeal was filed on 29/05/2024 against rejection of our grievance on 23/04/2024 and received by us on 30/04/2024.
3. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in not granting credit of TDS amounting to Rs 29,880.
4. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in raising demand of Rs 7,445.
5. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time.”
ITA No. 328/Ahd/2025 A.Y. 2022-23
“1. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in points of law and facts.
2. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has erred in holding that appeal was filed late and therefore, he did not condone alleged delay. It is submitted that appeal was filed in time. Appeal was filed on 29/05/2024 against rejection of our grievance on 23/04/2024 and received by us on 30/04/2024.
3. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in not granting credit of TDS amounting to Rs 41,697.
4. In law and in facts and circumstances of the Appellant’s case, the learned Commissioner of Income Tax (Appeals) has grossly erred in raising demand of Rs 8,692.
5. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time.”
3. The assessee filed return of income on 24-10-2020 declaring total income at Rs. 3,52,130/- and claimed refund of Rs. 30,026/-. The intimation u/s. 143(1) of the Income Tax Act was passed on 21-10-2021 and the claim for tax deducted at source to Rs. 35,493/- was not allowed. The rectification application u/s. 154 of the Income Tax Act was filed on 13-04-2023 for TDS credit of Rs. 35,493/-. The CPGRAM Grievance Application was filed on 11-04-2024 by the assessee and the CPGRAM Grievance Application was closed on 23-04-2024 and the assessee’s claim for credit to TDS to the extent of Rs. 35,493/- was rejected and demand of Rs. 5470/- was raised.
4. Aggrieved by the said rejection, the assessee filed appeal against the intimation u/s. 143(1) of the Income Tax Act, 1961 dated 21-10-2021 before the CIT(A) on 29-052024. Thus, the CIT(A) observed that there is a delay of 919 days in filing the appeal. The CIT(A) dismissed the appeal on the ground of delay as well as observing that the closure of CPGRAM is not an appealable order. The assessee filed present appeal before the Tribunal.
5. The trustee has filed the application for condonation of delay in filing the present appeal before the Tribunal which is delayed by 104 days thereby stating that the trustee forgot to submit the order of the CIT(A) to the chartered accountant of the trust. Since the delay before the Tribunal has been explained by the assessee trust and it appears genuine, hence the delay is condoned.
6. The ld. A.R. submitted that the rectification application was made within the stipulated time i.e. on 13-04-2023 as during the covet period, the Hon’ble Apex Court has directed to exclude the period of limitation due to Covid till 28th Feb, 2022. The ld. A.R. submitted that the order for CPGRAM Grievance Application was closed on 23-04-2024 in respect of rectification application, therefore assessee trust has rightly filed the appeal within the stipulated time before the CIT(A). The ld. A.R. submitted that the assessee be given credit of TDS of Rs. 35,493/- as the TDS deducted amounting to Rs. 35,493/- is reflected in the name of Hasmukhbhai S Dave who is a trustee of the trust and TDS was not claimed by Hasmukhbhai S Dave for assessment year 2020-21. The copy of Form 26AS of Hasmukhbhai S Dave was attached to the rectification application dated 2301-2023 and submitted to the Assessing Officer. Since the Assessing Officer has not passed rectification order and simply closed the case of the assessee, the matter may be remanded back to the Assessing Officer for considering the assessee trust’s claim that credit of TDS should be given in the name of the trust. The ld. A.R. further submitted that the CIT(A) instead of remanding back the matter to the Assessing Officer and directing the Assessing Officer to consider assessee trust’s claim, dismissed the appeal of the assessee.
7. The ld. D.R. relied upon the assessment order/intimation u/s. 143(1), CPGRAM disposed of the order dated 23-04-2024.
8. We heard both the parties and perused all the relevant material available on record. It is pertinent to the note that the CIT(A) has not commented anything on the merits of the case related to the refund in respect of TDS credit to the assessee trust. The rectification application filed by the assessee on 08-02-2023 was not rejected or accepted by the Assessing Officer. On 23-04-2024, the CPGRAM disposed of the complaint of the assessee trust dated 11-04-2024 thereby stating the case ‘closed’. It will be appropriate that the matter may be remanded back to the Assessing Officer with the direction that if the credit of TDS is in the name of trustee and the trust being given the details whether money are credited by trustee into the account of the trust, the same should be taken into account and the due credit to the assessee trust be given accordingly. The appeal of the assessee is partly allowed for statistical purpose.
9. All the three appeals are identical in facts and therefore the direction passed in ITA No. 326/Ahd/2025 for assessment year 2020-21 be followed in subsequent assessment years 2021-22 and 2022-23 being ITA Nos. 327/Ahd/2025 and 328/Ahd/2025.
10. In the result, all the three appeals of the assessee are partly allowed for statistical purpose.