Tds on salary adjustments

Dear All,

There is a query w.r.t TDS.

There are 2 companies under the sama management. During the FY 2011-12, an employee was employed in 1 company until Jan 2012 but during Feb 2012, the management decided to give him dual employement and get him employed in both the entities with retrospective effect of Apr 2011.

Salaries were recomputed with retrospective effect and accordingly there were recoveries and payments between these 2 entities. However on the TDS portion, there was already excess taxes paid in 1 entity and accordingly no TDS was deducted in the other entity. All these adjustments were done in Mar 2012.

Now the questions we have is

- Entity 1 has a refund to be issued in the employee's Form 16

- Entity 2 has a liability in the employee Form 16

- When both Form 16's are clubbed net liability is Zero.

How do we adjust the same ? We dont want to issue a Form 16 with a liability and at the same time issue Form 16 with a refund. Do let us know how can this be adjusted ?

Further, what is the consequence if a Form 16 with a liability is issued and when a Tax notice comes, can the Entity 2 take shelter that there is already an excess tax deducted in Entity 1 and hence there is no Tax deducted in Entity 2 ? Can we substantiate the same but providing any document (Inter company transfer / Dual employment letter issue)

Any other issue that arises of the above situation ? How can company ensure that there is no issue with the employee and also with the company ?

Any response to this will be much appreciated.

Thanks. Mappaji.