Retrospective Relief: ITAT Allows TCS Credit to Assessee for Minor’s Clubbed Income Under Section 64(1A)

Introduction

In Anshul Anil Goel v. Deputy Commissioner of Income-tax[i], the Hon’ble ITAT (Pune-Bench) dealt with an important issue regarding whether an Assessee can claim credit for Tax Collected at Source (‘TCS’) on income that includes earnings of a minor child, which were clubbed with the Assessee’s income as per the  Income-tax Act, 1961 (‘Act’). The appeal arose from an order by the Ld. Additional/Joint Commissioner of Income Tax (Appeals) – 1 (‘Ld. Addl./JCIT(A)’), where the challenge was to the Central Processing Centre’s (‘CPC’) disallowance of a TCS credit claimed by Anshul Anil Goel (‘Assessee’) for the assessment year (‘AY’) 2024-25 collected in the name of his minor son. The ruling involves complex issues of statutory interpretation, particularly the interplay between TCS provisions and income clubbing rules, set against the backdrop of a legislative amendment proposed in the Finance Bill, 2024 (effective from 01.01.2025) (‘Amendment2024’).

Brief Facts

• The Assessee, an individual, filed his return on 30.07.2024 for AY 2024-25, declaring a total income of Rs. 38,76,29,470/-. He claimed Tax Deducted at Source (‘TDS’) of Rs. 14,53,50,759/- and TCS of Rs. 25,28,802/-, which included Rs. 15,78,602/- collected for himself and Rs. 9,50,200/- collected in the name of his minor son, whose income was clubbed under s. 64(1A) of the Act.

• During the year, the minor son made a foreign investment, resulting in TCS collection by the bank, which issued Form 27D in the minor’s name. The Assessee, as required by s. 64(1A) of the Act included the minor’s income and investment in his return and claimed the corresponding TCS credit.

• However, while processing the return under s. 143(1) of the Act, the CPC disallowed the TCS of Rs. 9,50,200/- collected in the minor’s name, since it was not linked to the Assessee’s PAN, and raised a demand of Rs. 10,29,700/-, overlooking the clubbing provision.

• The Assessee appealed to the Ld. Addl/JCIT(A), relying on s. 206C of the Act and the Amendment2024, which allowed TCS credit to persons other than the collectee when income was clubbed. He argued that the absence of a pre-2025 mechanism should not have negated his claim. The Ld. Addl./JCIT(A), in its order dated 27.11.2024 (‘impugned order’), upheld the disallowance, emphasizing the amendment’s prospective effect and lack of an earlier framework.

• Aggrieved by the impugned order, the Assessee approached the Tribunal, asserting that the CPC had erred and that the Amendment2024 should have been applied retrospectively as a curative measure. The Assessee also contended that the CBDT Circular[ii] supported granting credit to prevent excessive tax retention.

Held

• The Tribunal set aside the Ld. Addl./JCIT(A) order dated 27.11.2024 and directed the Assessing Officer to allow TCS credit of Rs. 9,50,200/- in the Assessee’s hands, fully allowing the appeal and restoring the tax credit in full.

• The Tribunal held that since the minor’s income had been clubbed with the Assessee’s under s. 64(1A) of the Act, the TCS of Rs. 9,50,200/- collected in the minor’s name had to be credited to the Assessee. The Tribunal reasoned that denying this would have left the tax uncredited, contravening the equitable principle that tax collected must align with tax liability, as affirmed in Genpact India (P.) Ltd. v. DCIT[iii].

• The Tribunal ruled that the Amendment2024 to s. 206C of the Act was curative and retrospective, according to Allied Motors (P.) Ltd. V. CIT[iv]. It determined that the amendment addressed an unintended statutory gap, ensuring TCS credit in clubbing cases, and had to be operative from the point of such entitlement to avoid hardship.

• The Tribunal dismissed the Revenue’s contention that the Amendment2024 effective date of 01.01.2025 barred pre-2025 claims, holding that legislative intent and equity superseded procedural delays, especially in the absence of an alternative mechanism, thereby upholding the Assessee’s legitimate right.

Our Analysis

This judgment serves as a strong affirmation of taxpayer rights within the TCS framework, particularly in cases where the provisions of s. 64(1A) of the Act, relating to clubbing of income, intersects with the administration of tax credit, by applying the s. 206C of the Act amendment retrospectively, the Tribunal adhered to the Supreme Court’s decision in Allied Motors (supra) and Genpact India (supra), affirming that curative amendments rectify statutory deficiencies and safeguards against unjust outcomes. The Tribunal rejected the Revenue’s strict reliance on the prospective effective date of the amendment, holding that the absence of a statutory mechanism prior to 01.01.2025 ought not to result in the denial of legitimate TCS credit claims, particularly where the income has already been assessed in the hands of the taxpayer. It also referred to a CBDT Circular which emphasizes that tax authorities must not retain taxes beyond what is lawfully due, thereby reinforcing the principle of just and equitable tax administration.

By harmonizing statutory interpretation, administrative guidance, and judicial precedent, the Tribunal clarified the credit entitlement in cases involving clubbed income and TCS. It underscored that procedural gaps must not operate to the detriment of the Assessee. The ruling carries significant implications for similar TCS disputes and sets a persuasive precedent prioritizing substantive justice over technical formalities.

End Notes

[i] 2025 171 taxmann.com 382 (Pune – Trib.) [27.01.2025].

[ii] Circular No. 14/1955.

[iii] 2019 111 taxmann.com 402 (SC).

[iv] 1997 91 taxman 205 (SC).

Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.