TCS collected on the income of a minor child should be allowed as a credit to the parent.

ORDER

R.K. Panda, Vice President.- This appeal filed by the assessee is directed against the order dated 27.11.2024 of the Ld. Addl./JCIT(A)-1, Chennai relating to assessment year 2024-25.

2. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 30.07.2024 declaring total income of Rs.38,76,29,470/- and claimed total TDS of Rs.14,53,50,759/- and TCS of Rs.25,28,802/-. The break-up of TCS claimed by the assessee was as under:

TCS of Rs.15,78,602/- collected for self

TCS of Rs.9,50,200/- collected in the hands of his minor child whose income is clubbed in the income of the assessee.

3. During the year under consideration, the minor son of the assessee namely Master Nishkarsh Goel made a foreign investment on which the TCS was collected by the bank and form 27D was also issued by the bank. Since the entire income of the minor son of the assessee was required to be clubbed in the hands of the assessee, the assessee clubbed the income earned by the minor and also the foreign investment made by him in his return of income. Accordingly, the TCS collected in the name of the minor was also claimed by the assessee. However, the CPC while processing the ITR u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as „the Act’) denied the claim of TCS collected in the hands of the minor child and accordingly raised a demand of Rs.10,29,700/-.

4. The assessee filed an appeal before the Ld. Addl./JCIT(A). The provisions of section 206C of the Act were brought to the notice of the Ld. Addl./JCIT(A). It was also brought to his notice that the government has proposed to introduce a provision in section 206C to allow the Board to notify the rules for cases where credit of tax collected are given to person other than the collectee. However, to ensure that this provision is not misused, credit of TCS of the minor shall only be allowed where the income of the minor is being clubbed with the parent as under sub-section (1A) of section 64 of the Act which states that in computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child. Although this amendment was effective from 1^st day of January, 2025 it was submitted that since no mechanism is still provided to allow such TCS credit, the assessee cannot be deprived of the TCS credit of the minor child in his hands.

5. However, the Ld. Addl./JCIT(A) was not satisfied with the arguments advanced by the assessee and rejected the claim of the TCS credit of Rs.9,50,200/-by observing as under:

“4. Decision

The appellant had filed his Income tax return for the year 2024-25 on 30.07.2024 declaring a total income of RS 38,76,29,470/- claiming total TDS of Rs. 14,53,50,759/- & TCS of RS 25,28,802/-. Out of the total TCS claimed, an amount of Rs. 15,78,602/- collected for self and TCS of Rs. 9,50,200/- was collected in the hands of his Minor child whose income was clubbed with his income. It is seen from the ITR of the appellant that the income earned by him and also foreign investment made by his minor child were duly disclosed by him. As the income of his minor child was required to be clubbed in his hands, the TCS collected in his name was also claimed by the appellant.

In this connection, the Finance Minister in his Budget Speech 2024 & Memorandum Explaining the provisions in Finance Bill 2024, wherein following has been stated (relevant portion is reproduced below).

It is, therefore, proposed to introduce a provision in section 206C of the Act, to allow the Board to notify the rules for cases where credit of tax collected are given to person other than collectee. However, to ensure that this provision is not misused, credit of TCS of the minor shall only be allowed where the income of the minor is being clubbed with the parent as under sub-section (1A) of section 64 of the Act which states that in computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child. The amendment will take effect from the 1st day of January 2025. [Clause 70]

Since no mechanism is still provided to allow such TCS credit in the Act till date and also the said amendment will take effect only from 1^st January, 2025, the claim of the appellant is hereby dismissed. “

6. Aggrieved with such order of the Ld. Addl./JCIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:

7. The Ld. Counsel for the assessee at the outset submitted that it is an admitted fact that the income of the minor child was clubbed in the hands of the assessee, therefore, the TCS collected in the hands of the minor child should be given due credit in the hands of the assessee. He submitted that refusing the TCS credit of Rs.9,50,200/- collected in the name and PAN of the minor child, whose income was clubbed in the hands of the assessee, will cause undue hardship to the assessee and the assessee cannot be remediless. He submitted that if the amount of Rs.9,50,200/- collected towards TCS is not given due credit to the assessee, then the assessee may never get this refund.

8. Referring to the decision of the Hon’ble Supreme Court in the case of Genpact India Pvt. Ltd. v. DCIT (2019) 265 DLT 123, he drew the attention of the Bench to the observations of the Hon’ble Supreme Court and submitted that the assessee cannot be deprived of his legitimate right and cannot lose a remedy.

9. The Ld. Counsel for the assessee also filed a copy of the Notification No.114/2024, dated 16.10.2024, copy of which is placed at page 63 of the paper book and which reads as under:

“MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 16th October, 2024

G.S.R. 645(E).—In exercise of the powers conferred by section 295 read with section 206C of the Incometax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (Ninth Amendment) Rules, 2024.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962,–

(a) in rule 31AA, in sub-rule (4),—

(b) in rule 37-I,—

“(1A) (a) Where under any provisions of the Act, the income of the collectee is assessable in the hands of any person other than the collectee, the credit for the tax collected at source, shall be given to such other person and not to the collectee:

Provided that the collectee shall file a declaration with the collector and the collector shall report the tax collection in the name of the other person in the information relating to collection of tax referred to in sub-rule (1).

(b) The declaration filed by the collectee under the proviso to clause (a) shall contain the name, address, permanent account number of the person to whom credit for the tax collectible at source is to be given, amount of payment in relation to which credit is to be given and reasons for giving credit to such person.

(c) The collector shall issue the certificate for collection of tax at source under sub-section (3) of section 206C of the Act, in the name of the person in whose name credit is shown in the information relating to collection of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. “;

(c) in Form No. 27EQ, in the Annexure, after Verification, in the Notes, after Note 8, the following Note shall be inserted, namely:-

8A. Write “J” if no collection or lower collection is in view of notification issued under sub-section (12) of section 206C.’.

[No. 114/2024/F. No. 370142/21/2024-TPL]

KHUSHBOO LATHER, Under Secy.

Note : The Income-tax Rules, 1962 were published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and were last amended vide notification number G.S.R 639 (E), dated the 15th October, 2024.”

10. Similarly, he drew the attention of the Bench to rule 37(1) of the Income Tax Rules, which reads as under:

[Credit for tax collected at source for the purposes of sub-section (4) of section 206C.

37-1. (1) Credit for tax collected at source and paid to the Central Government in accordance with provisions of section 206C of the Act, shall be given to the person from whom the tax has been collected Thereinafter referred to as the collectee], on the basis of the information relating to collection of tax furnished by the person responsible for collection of tax at source (hereinafter referred to as the collector) to the income-tax authority or the person authorised by such authority

(1A) (a) Where under any provisions of the Act, the income of the collectee is assessable in the hands of any person other than the collectee, the credit for the tax collected at source, shall be given to such other person and not to the collectee:

Provided that the collectee shall file a declaration with the collector and the collector shall report the tax collection in the name of the other person in the information relating to collection of tax referred to in sub-rule (1).

(b) The declaration filed by the collectee under the proviso to clause (a) shall contain the name, address, permanent account number of the person to whom credit for the tax collectible at source is to be given amount of payment in relation to which credit is to be given and reasons for giving credit to such person.

(c) The collector shall issue the certificate for collection of tax at source under sub-section (3) of section 206C of the Act, in the name of the person in whose name credit is shown in the information relating to collection of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody.

(2) (i) Where tax has been collected at source and paid to the Central Government, credit for such tax shall be given for the assessment year for which the income is assessable to tax.

(ii) Where tax has been collected at source and paid to the Central Government and the lease or license is relatable to more than one year, credit for tax collected at source shall be allowed across those years to which the lease or license relates in the same proportion.

(2A) Notwithstanding anything contained in sub-rule (2), for the purposes of subsection (IF) or, sub- section (IG) or, sub-section (1H) of section 206C, credit for tax collected at source shall be given to the person from whose account tax is collected and paid to the Central Government account for the assessment year relevant to the previous year in which such tax collection is made]

(3) Credit for tax collected at source and paid to the account of the Central Government shall be granted on the basis of

11. Referring to the following decisions, he submitted that due credit should be given to the assessee:

12. Referring to the decision of the Hon’ble Supreme Court in the case of Allied Motors (P) Ltd. v. CIThe submitted that the Hon’ble Supreme Court in the said decision has held that a proviso which is inserted to remedy unintended consequences and to made the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. It has further been held that “it is well settled that if a statute curative or merely declaratory of the previous law retrospective operation is generally intended. In fact the amendment would not serve its object in such a situation unless it is construed as retrospective”. He also relied on the following decisions:

13. The Ld. DR on the other hand relied on the orders of the Assessing Officer and the Ld. Addl./JCIT(A).

14. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. Addl./JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee in the instant case filed his return of income declaring total income of Rs.38,76,29,470/- which included his income as well as the income of his minor child which has been clubbed as per the provisions of section 64(1A). Similarly, we find the assessee claimed TDS of Rs.14,53,50,759/- and TCS of Rs.25,28,802/- and the said TCS of Rs.25,28,802/-constitutes of an amount of Rs.15,78,602/- collected for self and TCS of Rs.9,50,200/- collected in the hands of his minor child whose income was clubbed with his income. Since the income of the minor child was required to be clubbed in the hands of the assessee, the assessee claimed the TCS collected in the name of minor child which was denied by the CPC. We find the Ld. Addl./JCIT(A) admitted that such income of the minor child has been clubbed with the income of the assessee and the assessee has claimed such TCS collected in the hands of the minor child. However, he dismissed the claim on the ground that the Memorandum explaining the provisions in the Finance Bill, 2024 regarding credit of tax collected to be given to the persons other than the collectee, is applicable from 1^st day of January, 2025 and since no other mechanism has been provided to allow such TCS credit in the Act till the said amendment which took effect only from 1^st day of January, 2025, therefore, such claim of the assessee cannot be entertained. In our opinion, since the income of the minor child was clubbed with the income of the assessee, the corresponding TCS collected in the hands of the minor also should be allowed and due credit should be given in the hands of the assessee. In our opinion, the Revenue cannot be allowed to retain the tax deducted at source or tax collected at source without credit being available to anybody. In our opinion, if the credit of tax is not allowed to the assessee, then credit of TCS cannot be taken by anybody.

15. So far as the contention of the Revenue that the Memorandum explaining the provisions in the Finance Bill, 2024 regarding the credit of tax collected to be given to the persons other than the collectee is applicable from 1^st day of January, 2025 and since so other mechanism has been provided to allow such TCS in the Act till the amendment which took place effective only from 1^st day of January, 2025 and therefore, such claim of the assessee cannot be entertained is concerned, the same, in our opinion, cannot deprive the assessee from his legitimate claim of TDS / TCS, the income of which has already been offered to tax. Therefore, such amendment in our opinion should be held as retrospective in nature and not to the detriment of the assessee against a legitimate claim.

16. We find the Hon’ble Supreme Court in the case of Allied Motors (P) Ltd. v. CIT (supra) has held that a proviso which is inserted to remedy unintended consequences and to made the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. It has further been held that “it is well settled that if a statute curative or merely declaratory of the previous law retrospective operation is generally intended. In fact the amendment would not serve its object in such a situation unless it is construed as retrospective”.

17. We find the Hon’ble Supreme Court in the case of Genpact India Pvt. Ltd. v. DCIT (supra) has observed as under:

“13. If the submission of the appellant is accepted and the concerned expression as stated hereinabove in Section 246(1)(a) or in Section 246A(1)(a) is to be considered as relatable to the liability of an assessee to be assessed under Section 143(3) as contended, there would be no appellate remedy in case of any determination under Section 115QA. The issues may arise not just confined to the question whether the company is liable at all but may also relate to other facets including the extent of liability and also with regard to computation. If the submission is accepted, every time the dispute will be required to be taken up in proceedings such as a petition under Article 226 of the Constitution, which Civil Appeal No. 8945 of 2019 @ SLP(C) No.20728 of 2019 Genpact India Private Limited v. Deputy Commissioner of Income Tax & Anr. normally would not be entertained in case of any disputed questions offact or concerning factual aspects of the matter. The assessee may thus, not only lose a remedy of having the matter considered on factual facets of the matter but would also stand deprived of regular channels of challenges available to it under the hierarchy offora available under the Act.

14. We, therefore, reject the submissions advanced by the appellant and hold that an appeal would be maintainable against the determination of liability under Section 115QA of the Act. “

18. In view of the above discussion and respectfully following the decisions cited (supra), we hold that depriving the assessee of due credit for TCS in the hands of the minor child whose income has already been clubbed in the hands of the assessee will cause undue hardship to the assessee for non-provision of any other mechanism by the Board. We, therefore, set aside the order of the Ld. Addl./JCIT(A) and direct the Assessing Officer to give due credit of TDS / TCS of the minor child in the hands of the assessee. The grounds raised by the assessee are accordingly allowed.

19. In the result, the appeal filed by the assessee is allowed.