High Court of Gujarat in case of Devarsh Pravinbhai Patel v/s Asst Commissioner Of Income Tax vide order dated 24th September 2018 has held that TDS credit needs to be given by Income-tax authorities to the deductee even if TDS is not deposited by the deductor.

Where employer deducted tax at source on salary payments made to the Assessee however did not deposit such tax with the credit of Central Government, Department could not deny the benefit of tax deducted at source by the employer of the Assessee and Credit of such tax would be given to the Assessee for the respective years

Assessee was an individual employed as a pilot. During the relevant period, the employer deducted tax at source on salary payments made to the assessee. However, the employer did not deposit such tax with the credit of Central Government. In this regard, the question under consideration was that can the Department seek to recover such amount from the assessee or whether the assessee was correct in contending that he had already suffered the deduction of tax, the mere fact that the deductee did not deposit such tax with the credit of Central Government could not permit the Income Tax Department to recover such amount from assessee.

High Court of Gujarat held that, under the circumstances, by allowing these petitions we hold that the Department cannot deny the benefit of tax deducted at source by the employer of the petitioner during the relevant financial years. The credit of such tax would be given to the petitioner for the respective years. If there has been any recovery or adjustment out of the refunds of the later years, the same shall be returned to the petitioner with statutory interest.

Our comments

This precedence seems to have brought clarity on the issue of claiming tax credit, where the assessee were required to follow up with the deductor for depositing the tax amount to the credit of Central Government. This is certainly going to evolve a different line of litigation which is indeed correct as the Income-tax Act has the provisions laid down to penalise the deductor for non-payment of taxes after collecting the same and where such consequences have been laid down in the Act for the deductor, the income-tax authorities cannot enforce hardships against the deductee at the same time, who have rightfully claimed the credit in their income-tax return.

Tags:

Author Bio

Qualification: CA in Practice
Company: Wadhwa & Shah, Chartered accountants
Location: Mumbai, Maharashtra, IN
Member Since: 14 Jul 2017 | Total Posts: 15
Qualified as a chartered accountant in 2011 and in practice since 2014 View Full Profile

My Published Posts

More Under Income Tax

One Comment

  1. Anupam Gupta says:

    Dear Mr. Wadhwa,
    Thanks for your inputs. In this context, I would like to seek your advise under the following circumstances :-
    1) My mother, retired government employee, has received IT notice under section 143(1) for deposit of tax for AY-2009-10 after filing return for AY-2019-20
    2) She has Form-16, issued by Government department (Employer) to confirm the deducted tax
    3) As per Form-26AS, deducted tax is still showing as “P” and not final, after 10 years
    4) No cooperation by ex-employer to confirm the tax deposition
    4) Please suggest, whether is it not a time bound case to raise demand after 10 years?
    5) What response should be submitted to Income Tax department, in this case?
    Please advise.
    Thanking You,
    Anupam Gupta

Leave a Comment

Your email address will not be published. Required fields are marked *