Rakesh Kumar Bhutoria Vs ADIT, CPC, Bengaluru (ITAT Kolkata)
A recurring controversy in income-tax assessments is whether credit of TDS can be denied to an employee when the employer deducts tax from salary but fails to deposit it with the Government. The ITAT Kolkata in the case of Rakesh Kumar Bhutoria has reaffirmed the principle that a salaried employee cannot be penalized for the employer’s default, and once tax has been deducted at source, credit must be allowed to the employee.
1. Statutory Framework
(a) Deduction of Tax at Source on Salary – Section 192
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- Employers are mandated to deduct tax at source at the time of salary payment, based on estimated income and tax slab rates.
(b) Payment of TDS to the Government – Section 200 & Rule 30
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- Once deducted, TDS must be deposited with the Central Government within prescribed timelines.
(c) Credit of TDS – Section 199 & Rule 37BA
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- Section 199(1): Tax deducted and paid to the Government is deemed payment on behalf of the employee.
- Rule 37BA(3): Credit is to be given to the deductee even though the tax was not deposited by him but deducted from his income.
Interpretation: The right to credit arises on deduction, not on deposit.
(d) Employer’s Default – Section 201
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