Income Tax alert: TDS cut but not paid to government? Here's why you shouldn't worry
A taxpayer whose company went bankrupt, filed his return of income for assessment year 2012-13 on July 31, 2012, that is, within the applicable due date. During the relevant period, the company had deducted Tax at Source (TDS) totalling to Rs 2.68 lakh from the salary payments made to the taxpayer.
A taxpayer whose company went bankrupt, filed his return of income for assessment year 2012-13 on July 31, 2012, that is, within the applicable due date. During the relevant period, the company had deducted Tax at Source (TDS) totalling to Rs 2.68 lakh from the salary payments made to the taxpayer.
On account of bankruptcy, the company did not deposit this tax amount with the government. However, in his return of income, the taxpayer claimed credit for this TDS as this amount was deducted from his salary and was never received by him.
During the course of assessment, the tax officer objected to the taxpayer's claim for credit of the TDS on salary and raised a demand for the equivalent amount and added interest on the same. This demand was not acceptable to the taxpayer. He was further aggrieved when the tax officer adjusted a refund of Rs 47,140 for assessment year 2013-14 against the above demand.
At various appellate levels, authorities ruled in favour of the tax officer. When the matter came up for decision before the Gujarat High Court, the question came up whether the tax officer was in his right to recover the tax amount from the taxpayer? Alternatively, was the taxpayer correct in contending that since he had already suffered deduction of TDS, but the same not being deposited by the company, it did not permit the tax officer to recover the said amount from the taxpayer.
The taxpayer relied on decisions issued by Bombay High Court and Gauhati High Court in similar cases. In both these cases, the high courts had held that once the tax has been deducted and the taxpayer has the applicable TDS certificate issued to him by the deductor; then the tax officer cannot deny the credit for such TDS to the taxpayer.
However, if the tax officer is of the opinion that the deductor has not deposited the said amount of TDS, it is always open for the department to recover the same from the deductor. The Income Tax Act has defined rules and procedures to that extent.
Given similar facts in the current case, the Gujarat High Court ruled that the taxpayer be allowed credit for the TDS deducted on his salary and even directed that any recovery or adjustment made out of refunds of later years to be refunded to the taxpayer along with applicable interest.
This decision pertains to a period when all of the TDS procedures had not been made online. Since then, along with payments, the issuance of TDS certificates (Form-16 and Form-16A) have also been linked to online downloads.
In other words, the TDS certificate can be made available to the taxpayer, if and only if, the corresponding TDS has been deposited with the government by the deductor. This implies that in a case, with facts as described above, the taxpayer would not receive any TDS certificates, which can be submitted to the tax officer for the purposes of claiming credit.
Watch This Zee Business Video Here:
However, the premise remains the same; in such cases, the taxpayers should maintain other documentation like payslips, full and final settlement slips, etc, which can provide evidence of deduction of tax from the proceeds received. These documents will also aid taxpayers' right to claim credit for taxes deducted.
By; Arvind Rao
(The writer is a Sebi-registered investment adviser)
Source: DNA Money
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Top Gold ETF vs Top Large Cap Mutual Fund 10-year Return Calculator: Which has given higher return on Rs 11 lakh investment; see calculations
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
11:16 AM IST