Credit Of TDS Not Deposited By Deductor Can Be Granted To Deductee: Delhi HC
The Delhi High Court observed that credit of Tax Deducted At Source (TDS) not deposited by deductor can be granted to deductee.
The court also added that such TDS cannot be recovered from the deductee.
The Division Bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “The argument that credit for TAS deducted in the present case by Ninex should not be given to the petitioner, fails to recognize the fact that the amount retained against remittance made by the payer is nothing but tax which the assessee/ deductee has offered for tax by grossing up the remittance. If credit is not given, the respondents would end up doing indirectly what they cannot do directly i.e., that recover tax directly from the assessee i.e., the deductee”.
“In our view, Section 199 of the Act cannot come in the way of granting the deductee being granted credit of TAS deducted by Ninex.”, added the Bench.
Advocate Kavita Jha appeared for the Petitioner/ Assessee while the Respondent/ Revenue was represented by Advocate Zoheb Hossain.
The brief facts of the case were that the assessee received interest income from money advanced to borrower on which tax was deducted at source, however the same was not deposited by the borrower and thus, was not reflecting in Form 26AS. Even though the assessee did not claim TDS in original return, however, it claimed the same in the revised return. The AO however denied the credit of the TDS in the intimation processed under Section 143(1) against which assessee filed rectification application under Section 154 for taking claim of such TDS. This was also rejected by the AO.
After considering the submission, the Bench observed that deduction of taxes at source is one of the methods of collecting tax and TDS is part of assessee’s income and therefore, the gross amount is included in its total income and offered to tax on this premise that TDS would have to be treated as tax paid on behalf of the assessee.
The Bench noted that the deductor is undergoing Corporate Insolvency Resolution Process (CIRP) and the resolution professional issued a certificate evidencing that tax at source was deducted and the assessee claimed a slightly higher amount of TDS.
The Bench further observed that though the deductor did not deposit the TDS with the government, however, neither can the demand of tax withheld by the deductor be recovered from assessee nor can the same amount be adjusted against the future refund.
The High Court accordingly concluded that since the assessee lodged a claim with the Insolvency Resolution Professional (IRP), if it were to receive any amount, it will deposit the TDS amount with the government.
Cause Title: BDR Finvest Pvt Ltd v. Deputy Commissioner of Income Tax and Ors. [Neutral Citation: 2023: DHC: 8284-DB]
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