Buyer deposited Rs 21 lakh property TDS in wrong year; ITAT Delhi allows seller’s Form 71 and grants tax credit (AI generated representative image)
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The Income Tax Appellate Tribunal (ITAT), Delhi has ruled that when a seller sells a property and reports long term capital gain (LTCG) by declaring the full sale amount in AY 2022-23, and claims the TDS in the sale year, he should receive the TDS credit. This holds true even if the buyer mistakenly deposited this TDS in the wrong year.
This judgement was based on a case involving a property sold by a non-resident individual in AY 2022-23. However, the buyer paid the TDS in AY 2023-24, leading the Income Tax Department to deny the seller the TDS credit. The seller, being an NRI, had a 20% TDS deducted, amounting to around Rs 20.99 lakh.
Background details
The non-resident property seller filed his income tax return (ITR) for AY 2022-23 on July 27, 2022 declaring a taxable income of Rs 4.86 lakh. Of this Rs 4.86 lakh income, Rs 4.64 lakh was the income from the house property while the income from other sources was Rs 32,115. He also claimed long term capital loss of Rs 5.55 lakh and TDS credit of Rs 21.6 lakh. This means, he would have got a tax refund, had the TDS credit been granted.
Without the TDS credit, his tax payable came to Rs 12,301. While processing his Income Tax Return, the centralized processing centre of the Income Tax Department allowed Rs 60,872 TDS credit against his claim of Rs 21.6 lakh. The CPC did not allow the TDS credit of Rs 20.99 lakh which had been deducted and deposited on sale of the property by the buyer.
The unhappy seller filed an appeal in CIT (A), which was dismissed. After that. he filed an appeal in ITAT Delhi. On November 12, 2025, he won the case in ITAT Delhi.
FCA Alok Vasant, and Advocate Ms. Poonam Ahuja represented him in ITAT Delhi.
Why did the taxpayer win this case?
Chartered Accountant Suresh Surana explained to ET Wealth Online: In the given case, the taxpayer, a non-resident individual, sold an immovable property during FY 2021–22 and duly declared the resulting long-term capital gain in his return of income for AY 2022-23.
At the time of sale, the buyer deducted a TDS of Rs 20.99 lakh under Section 194-IA. However, instead of depositing the TDS in FY 2021–22, the buyer filed the TDS return and deposited the tax only in FY 2022–23, causing the credit to appear in the taxpayer’s Form 26AS for FY 2022-23 (AY 2023–24).
While processing the income tax return (ITR) for AY 2022–23, the CPC granted credit for only Rs 60,872 and denied the balance TDS of Rs 20.99 lakh since it was reflected in the subsequent year.
Feeling aggrieved, the taxpayer filed an appeal with the Commissioner (Appeals). The Commissioner (Appeals) upheld the denial, reasoning that since the TDS appeared in Form 26AS for AY 2023–24, the income should also have been declared in that year. Aggrieved, the taxpayer appealed before the ITAT Delhi.
According to Surana, the ITAT Delhi ruled in favour of the taxpayer and directed the Assessing Officer (AO) to grant the TDS credit in AY 2022–23. The Tribunal held that the taxpayer was correct in declaring capital gains in the year of the transfer, as mandated by Section 45(1), irrespective of when the TDS was actually deposited by the buyer.
Surana says: “ITAT Delhi clarified that the year of TDS reflection in Form 26AS cannot override the statutory requirement relating to the timing of capital gains taxation.”
The Tribunal further observed that Section 199, read with Rule 37BA, expressly provides that TDS credit must be allowed in the year in which the related income is assessable. In situations where the income is reported in one year but TDS is deposited in another, Section 155(20) enables the taxpayer to file Form 71 so that TDS credit can be aligned to the correct assessment year.
Surana points out: “Since the taxpayer had duly filed Form 71 within the prescribed time and had offered the income in the correct year, the Tribunal held that the Assessing Officer was duty-bound to apply the matching principle and allow credit in AY 2022-23 based on Form 71.”
Accordingly, the Tribunal concluded that the lower authorities erred in denying the credit merely because the buyer deposited TDS late, an event entirely outside the taxpayer’s control. Surana says that the Tribunal therefore directed the Assessing Officer to assess the income in AY 2022-23 and grant full TDS credit of Rs 20.99 lakh in that year, as required under the Act and the Rules.
ITAT Delhi Analysis and discussion
ITAT Delhi gave this judgement on November 12, 2025.
Form 71 is filed
ITAT Delhi noted that the assessee sold the property and reported a long term capital gain by declaring the total consideration value in AY 2022-23 and the assessee also claimed the TDS in AY 2022-23.
However, the buyer deposited the deducted tax only in AY 2023-24. These facts were clearly documented and also submitted before the lower authorities. The main question here is when the assessee can take advantage of the tax credit.
ITAT Delhi said: “As per the procedure, the assessee has to submit Form 71 within 2 years to claim the same. It is brought to our notice that the assessee had already filed the Form 71 through ITBA portal. Therefore, the assessee has to declare the income in the year of transfer not on the basis of TDS credit.”
Therefore, ITAT Delhi said that the Assessing Officer has to follow the matching principle and give the TDS credit based on the Form 71 uploaded by the assessee.
Judgement:
- ITAT Delhi noted that the lower authorities denied the tax credit. Therefore, ITAT Delhi directed the Assessing Officer to give the TDS remitted by the buyer in the subsequent assessment year, however the actual transaction relates to AY 2022-23, therefore, the Assessing Officer is directed to assess the income declared by the assessee in the Assessment Year 2022-23 and give credit of AY 2023-24 based on the Form 71 submitted by the assessee.
- Therefore, the grounds of appeal raised by the assessee are allowed. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 12th day of November, 2025.
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