TDS Credit Denied to Assessee Despite Declaring 50% Share of Income: ITAT Delhi's Unexpected Direction in Kanika Satyanand vs ITO
Background and Core Facts of the Dispute
The case of Kanika Satyanand Vs ITO (ITAT Delhi) arising out of Assessment Year 2024-25 presents a thought-provoking scenario at the intersection of TDS credit allocation, PAN-based reporting mismatches, and the practical application of Section 199 read with Rule 37BA of the Income Tax Act, 1961.
The matter originated from proceedings under Section 154 of the Income Tax Act, 1961, following the processing of the assessee's return under Section 143(1). The return for AY 2024-25 was filed on 30.7.2024, declaring total income of Rs. 1,00,50,890/-. During processing on 29.9.2025, TDS credit of Rs. 2,22,988/- was denied, giving rise to the present appeal before the Delhi Bench of the Income Tax Appellate Tribunal.
The underlying facts involve income received from Zodius Technology Fund and Zodius Technology Opportunities Fund, on which tax was deducted at source under Section 194LBB of the Income Tax Act, 1961. The total income credited by Zodius Technologies stood at Rs. 44,59,794/-, and the corresponding TDS deducted amounted to Rs. 4,45,979/-. However, the critical complication was that the entire TDS had been deducted and reported under the PAN of Mr. Mohit Satyanand (PAN: AFGPS1957P), the assessee's brother — not under the assessee's own PAN.
How Each Sibling Reported the Income
The 50:50 income-splitting arrangement between the siblings is central to understanding the dispute. During AY 2024-25:
- Mr. Mohit Satyanand reported only 50% of the Zodius Technologies income in his return of income, i.e., Rs. 22,29,988/-, and correspondingly claimed 50% of the TDS, i.e., Rs. 2,22,988/-, as reflected in his computation of income and Form 26AS.
- The assessee, Kanika Satyanand, reported the remaining 50% of the income in her own return of income and sought credit for the proportionate TDS of Rs. 2,22,988/-.
The TDS credit claimed by the assessee was, however, denied during processing, since the deductor had mapped the entire TDS against Mr. Mohit Satyanand's PAN. The National Faceless Appeal Centre (NFAC), Delhi confirmed this denial, prompting the assessee to approach the Tribunal.
The Sole Ground of Appeal
The assessee raised the following solitary ground before the ITAT:
"The CIT(A) erred in law and on facts in denying TDS credit of Rs. 2,22,988/- despite the assessee having duly offered the corresponding 50 percent share of income to tax. The CIT(A) failed to appreciate that Mr. Mohit Satyanand had claimed credit for only 50 per cent of the TDS in his return of income, thereby clearly attributing the balance income and corresponding TDS to the assessee. The denial of TDS credit on mere procedural grounds, despite complete disclosure of material facts, is contrary to Section 199 read with Rule 37BA and settled principles of substantive justice."
The assessee's position was legally straightforward: since her brother had claimed only half the TDS in his return, the remaining half — matching the income she herself had declared — ought to flow as TDS credit in her hands. She invoked Section 199 read with Rule 37BA, which together govern the manner in which TDS credit is to be granted — specifically, to the person on whose behalf tax is deducted, or to whom the income is assessable.
The Learned Authorised Representative reiterated before the Tribunal that the denial was purely procedural in nature, driven by the PAN mismatch in the deductor's reporting, and that this could not override the substantive position where full disclosure had been made by both siblings.
The Departmental Representative, on the other hand, relied upon and supported the findings recorded by the lower authorities.