INCOME TAX ACT, 1961

Section 205

Tax deduction at source - Credit for TDS deducted from assessee - TDS not completely deposited with Revenue by deductor - Bar against direct demand on assessee

Assessee-company provided services to an entity, namely, 'C'. The said entity 'C' deducted tax at source, however, the same was not completely deposited with Revenue and balance amount, after deducting the tax, was also not remitted by 'C' to the assessee. It was grievance of the assessee that it had not been given credit for the tax deducted at source by 'C', which was not deposited with the Revenue. Further, the assessee averted that instead of being granted credit for the tax deducted at source by 'C', a demand was raised against it. Held: Section 205 read with Instruction, dated 1-6-2015, clearly points in direction that assessee cannot be called upon to pay tax, which has been deducted at source from his income. Therefore, Revenue could not recover the deficit tax at source from the assessee, which was deducted and pocketed by 'C', and it could not also refuse to grant credit for the same to the assessee. The rationale being what the Revenue cannot do directly, it is impermissible for it to reach the same end indirectly. Hence, the Revenue was directed to grant refund to the assessee.

REFERRED : Sanjay Sudan v. The Asstt. CIT & Anr. [WP (C) No. 6610/2019, dated 17-2-2023] : 2023 TaxPub(DT) 1390 (Del-HC)

FAVOUR : In assessee's favour

A.Y. : 2011-12

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