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TDS credit to be given in case of default in payment by the deductor

Shriya Vaidya 
on 19 March 2019

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Landmark Judgement

Are we aware that the Income Tax Department cannot deny credit of TDS to the recipient of TDS even though there is a default in payment by the deductor?

No. We were not. The Income Tax Dept cannot deny credit. There was recent judgement passed by High court in favour of assessee claiming TDS even though there was a default in payment by the deductor of the assessee.

Please refer: Ankil Kureshi & BN Karia JJ, Devarsh Patel Vs Asstt. CIT. R/Special Civil Application No 12965 of 2018 - 24th September 2018.

The gist of case is as under:

  1. The petitioner (an Individual) was an employee of King Fisher Airlines
  2. He had filed the return of income for the assessment year 2012-13.
  3. During the relevant period, his employer has deducted TDS and issued form 16 to the petitioner, but the employer failed to pay such TDS to the Govt.
  4. While claiming the refund for that relevant period, the Department objected to this and issued a notice with the penalty.
  5. However, the Petitioner was of view that the stand of the Department was against the statutory provisions of the Income Tax Act.
  6. His view was that he had already suffered TDS on account of deduction and he had received the Form 16 from the employer. How can he responsible to the Department to pay this amount along with the interest.
  7. Basis decisions taken by High court in case of Asst, CIT Vs Om Prakash Gattani and Sumit Devendra Rjani Vs Assistant Commissioner of Income tax, the case was in favour of the petitioner.

Conclusion:

We don’t have to worry whether our deductor has paid our TDS to the Government. We need to ensure that we have received the consideration amount less of TDS and Form 16/16A has been received by us.

Hope this judgement is very much useful for professional like us.


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Shriya Vaidya 

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