The Income Tax Appellate Tribunal (ITAT), Agra, has directed the tax department to give a landlord credit for the full ₹4.06 lakh tax deducted at source (TDS) after the tribunal found that State Bank of India (SBI) had inadvertently reported the entire TDS against his PAN instead of distributing it among three co-owners.
The ruling came in the case of Tejpratap Singh Yadav, who jointly owned a property with his mother, Mradula Yadav, and sister, Deepali Yadav. According to the ITAT’s 30 July 2026 order, the three co-owners had leased the property to SBI for annual rent of ₹40.62 lakh. Each co-owner declared one-third of the rental income in their respective income tax returns.
The tribunal recorded that SBI had deducted the entire ₹4,06,250 TDS against Yadav’s PAN, instead of reporting one-third of the TDS against each of the three co-owners. The assessing officer consequently allowed Yadav TDS credit of only ₹1,35,417 and denied the remaining ₹2,70,833.
Why the tax department denied ₹2.71 lakh TDS credit
Yadav filed his ITR for assessment year 2020-21 on 3 February 2021, declaring total income of ₹22.08 lakh, the tribunal said. His case was later reopened after the tax department flagged a mismatch of ₹27.08 lakh relating to rent received and ₹20.79 lakh relating to the purchase of a motor vehicle.
During the assessment proceedings, the assessing officer accepted Yadav’s explanation regarding the source of funds for the vehicle purchase. The officer also accepted that ₹40.62 lakh in rent had been received in the joint bank account of the three co-owners, according to the ITAT order.
The issue was the TDS reflected in Yadav’s Form 26AS. The tribunal recorded that SBI had deducted the entire ₹4.06 lakh under Yadav’s PAN, even though he had offered only one-third of the rental income to tax. The assessing officer therefore restricted his TDS credit to one-third, or ₹1,35,417.
The first appellate authority upheld the assessing officer’s decision, after which Yadav approached the ITAT Agra.
Before the tribunal, Yadav’s representative argued that the TDS had been posted against his PAN because of an inadvertent mistake by SBI. The taxpayer submitted a letter from the bank’s branch manager confirming that the lease agreement was with all three co-owners and that the entire TDS had been posted against Yadav’s PAN because of the bank’s mistake.
Yadav also submitted the ITRs of the other two co-owners and affidavits stating that they had not claimed their proportionate TDS, according to the tribunal’s order.
ITAT explains why Yadav should get the full TDS
The tribunal examined Section 199 of the Income Tax Act and Rule 37BA of the Income Tax Rules, which govern the allocation of TDS credit. Rule 37BA provides for TDS credit to a person other than the deductee in specified circumstances, subject to conditions including a declaration to the deductor.
The ITAT noted that no such declaration had been filed in this case. It therefore held that the other two co-owners could not be given credit for their two-thirds share of the TDS under Rule 37BA.
However, the tribunal also noted that the other two co-owners had not claimed their proportionate TDS in their ITRs. They had also submitted affidavits supporting Yadav’s claim for the entire TDS, the order said.
The ITAT said procedural rules should advance the cause of justice and should not be applied in a manner that defeats a taxpayer’s rights. It observed that “technical justice cannot substitute substantial justice” and said procedural law should be an aid to justice rather than an obstruction.
The tribunal then considered what would happen to the remaining ₹2,70,833 if Yadav were denied the credit. It observed that the amount would effectively be permanently retained by the tax department because the other two co-owners could not receive the credit and had not claimed it.
“The revenue cannot be allowed to retain the tax deducted at source without its credit to someone,” the tribunal observed. Since the co-owners supported Yadav’s claim and had not claimed the proportionate TDS, the ITAT held that Yadav was entitled to credit for the entire TDS deducted against his PAN.
The ITAT consequently allowed Yadav’s appeal, set aside the earlier orders and directed the assessing officer to give him credit for the full ₹4,06,250 TDS, instead of ₹1,35,417. The order was pronounced on 30 July 2026 by the Agra bench comprising Sunil Kumar Singh, Judicial Member, and Brajesh Kumar Singh, Accountant Member.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.