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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Incredible Unique Buildcon Private Limited – Appellant
Versus
Office of The Income Tax Officer Ward (12) (1) New Delhi – Respondent
W.P.(C) 7797 of 2023
Decided On : 31-05-2023
Tax Deduction at Source - Refund - Section 205, Instruction dated 01.06.2015 - The court allowed the writ petition, directing the respondent to issue a refund of Rs.11,39,870 to the petitioner. The judgment discussed the provisions of Section 205 and the instruction dated 01.06.2015, emphasizing that the assessee cannot be called upon to pay tax himself to the extent to which tax has been deducted from his income. It held that the revenue cannot recover the deficit tax at source from the petitioner, which was deducted and pocketed by another entity, and they cannot refuse to grant credit for the same, as it is impermissible for them to reach the same end indirectly.
Fact of the Case:
The petitioner provided services to an entity, and the tax at source deducted by the entity was not completely deposited with the revenue. The petitioner claimed that the deficit tax at source was not credited to them, and a demand was raised against them. The petitioner sought a refund for the amount due to them.
Finding of the Court:
The court found that the revenue cannot recover the deficit tax at source from the petitioner, and they cannot refuse to grant credit for the same. It directed the respondent to issue a refund of Rs.11,39,870 to the petitioner.
Issues: The issues involved the recovery of deficit tax at source and the refusal to grant credit for the same by the revenue.
Ratio Decidendi: The court relied on Section 205 and the instruction dated 01.06.2015, emphasizing that the assessee cannot be called upon to pay tax himself to the extent to which tax has been deducted from his income. It held that the revenue cannot recover the deficit tax at source from the petitioner and cannot refuse to grant credit for the same.
Final Decision: The writ petition was allowed, and the respondent was directed to issue a refund of Rs.11,39,870 to the petitioner.
JUDGMENT
Rajiv Shakdher, J. (Oral)
CM APPL. 30117/2023
1. Allowed, subject to just exceptions.
W.P.(C) 7797/2023
2. Issue notice.
3. Mr Abhishek Maratha, learned senior standing counsel, who appears on behalf of the respondent/revenue, accepts notice.
4. Mr Maratha cannot but accept that the issue raised in the present writ petition is covered by the judgment of this court dated 17.02.2023, passed in WP(C) 6610/2019, titled Sanjay Sudan v. The Assistant Commissioner of Income Tax & Anr..
4.1. In this context, Mr Maratha says that a counter-affidavit is not required to be filed, as the instant writ petition concerns a pure question of law.
5. Broadly the facts obtaining the case are as follows:
6. This writ petition concerns Financial Year (FY) 2010-11[Assessment Year (AY) 2011-12].
7. The petitioner had, as it appears, provided services to an entity going by the name Clutch Auto Ltd. (CAL). The value of the service provided amounted to Rs.8,50,26,199/-. The said entity, i.e., CAL, deducted tax at source amounting to Rs.24,96,199/-. It is the petitioner's stand that the tax at source deducted by CAL was not completely deposited with the respondent/revenue.
8. The petitioner also claims that the balance amount, after deducting tax at source, was also not remitted to it by CAL. Insofar as this aspect is concerned, the petitioner claims that it is an issue which is being agitated before the concerned bench of the National Company Law Tribunal (NCLT).
9. We may note that according to the petitioner, CAL only deposited Rs.69,897/- towards tax deducted at source, resulting in a deficit of Rs.24,26,302/-. This aspect is not disputed by the respondent/revenue.
9.1. Therefore, the grievance of the petitioner is that it has not been given credit for the tax deducted at source by CAL, which was not deposited with the respondent/revenue.
10. The petitioner thus avers that instead of being granted credit for the tax deducted at source by CAL, a demand amounting to Rs.15,24,840/- was raised against it.
11. In these circumstances, the petitioner has approached this court with the following substantive prayer:
"a) Issue writ in the nature of mandamus or any other appropriate writ/order/direction to the effect directing the Respondent to issue the refund amounting to Rs.11,39,870 I- due to the Petitioner for AY 2011-12"
12. This very issue, as indicated above, arose for consideration in Sanjay Sudan's case. It would, therefore, be appropriate to set forth the relevant paragraphs of the said judgment:
"7. According to us, Section 205 read with instruction dated 01.06.2015, clearly point in the direction that the deductee/assessee cannot be called upon to pay tax, which has been deducted at source from his income. The plain language of Section 205 of the Act points in this direction. For the sake of convenience, Section 205 is extracted hereafter:
"Section 205 Bar against direct demand on assessee.
Where tax is deductible at the source under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income."
8. The instruction dated 01.06.2015 is aligned with the aforesaid provision of Act inasmuch as it clearly provides in paragraph 2 that since the Act places a bar on a direct demand qua the deductee assessee, the same cannot be enforced coercively. For the sake of convenience, paragraph 2 of the said Instruction is extracted hereafter:
"...2. As per Section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per Section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter-XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coerci
The main legal point established is that the revenue cannot recover the deficit tax at source from the petitioner and cannot refuse to grant credit for the same, as it is impermissible for them to re....
The main legal point established in the judgment is that the assessee cannot be penalized for the failure of the employer to deposit the deducted tax with the revenue, as per the provisions of Sectio....
The taxpayer is entitled to TDS credit despite the deductor's failure to remit the deducted taxes, ensuring no coercive demand is imposed on the taxpayer according to statutory provisions and directi....
Tax demands cannot be enforced against deductees if TDS has been deducted but not deposited by the deductor, as per Section 205 of the Income Tax Act.
The court affirmed that an employee is entitled to TDS credit despite the employer's failure to deposit it, preventing unjust tax liability on the employee.
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