INCOME TAX ACT, 1961

Section 201

Tax deduction at source - Assessee-in-default - TDS not reflected in Form 26AS -

Assessee was employed with “EIEL”. TDS on salary paid to assessee was deducted by EIEL. Assessee claimed total TDS amounting to Rs. 12,24,376 deducted by EIEL. These deducted TDS were not deposited with Central Government's account (Govt.'s A/c) by EIEL. As TDS entries were not reflected in Form-26AS, claim of TDS was not granted by CPC while processing return of income under section 143(1). In appeal, CIT(A) also denied claim of TDS. Hence this appeal. Held: Section 31(1) of the Insolvency and Bankruptcy Code after amendment of 2019, makes Resolution plan binding on Central Government in respect of payment of dues arising under any law for time being in enforce. Further, section 238 of IBC specifically provides that IBC overrides provisions of any law that is inconsistent with IBC. In the case in hand EIEL was an assessee-in-default under section 201 and sub-section 2 of section 201 provides that such tax along with interest thereupon as recoverable under sub-section (1A), shall be a charge upon all assets of assessee-in-default. It is admitted fact that order under section 201/ 201(1A) for relevant financial year stands passed against assessee-in-default EIEL who was employer of assessee. That being so, having taken recourse under law by raising a demand for non-deposition of TDS under section 201 and interest under section 201(1A) and which stands further determined and admitted under Corporate Insolvency Resolution Process, then there could have been no justification under law to deny credit to assessee because as such Government's claim of TDS stands satisfied and cannot be said to be still outstanding. Even otherwise, section 205 is very crystal clear in its intention and clarifies that where tax stands deducted at source assessee shall not be called upon to pay tax himself to extent to which tax has been deducted from income. In the case in hand, deduction of tax from salary of assessee is not disputed and Government's claim of TDS stands satisfied under CRP and cannot be said to be still outstanding so as to deny its credit to assessee. Thus, there was no justification with CIT(A) to merely create a tax liability on grounds of propriety involved when otherwise, there was no legal foundation. Appeal of assessee was allowed and AO was directed to give credit of TDS of Rs. 12,74,469 to assessee.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2016-17

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