TDS Credit cannot be denied even if TDS not

deposited by deductor
 mohnish.wadhwa
 | Income Tax - Articles
 14 Mar 2019
 2,730 Views
 0 comment

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.