IMPORTANT POINT
The court established that withholding TDS without depositing it with the Income Tax Department is illegal and constitutes unjust enrichment, emphasizing the statutory duty of the deductor to comply with tax laws.

JUDGMENT :

Shree Chandrashekhar, A.C.J.

M/s. Anvil Cables Private Limited has approached this Court with the following prayers :

i. For the issuance of an appropriate writ/order/direction or a writ in the nature of mandamus directing the Respondent JBVNL to forthwith issue TDS Certificate for the amount of Rs.2,90,32,000/- deducted as Income Tax @ 2% from the bills raised by the Petitioner towards supply of materials to the Respondent JBVNL so as to enable the Petitioner to get the tax credit of the said amount under Income Tax laws; or in alternative.

ii. In the alternative to prayer (i), for the issuance of an appropriate writ/order/direction or a writ in the nature of mandamus directing the Respondent JBVNL to forthwith release the amount of Rs.2,92,32,000/- so deducted from the bills of the Petitioner towards supply of materials by the Petitioner to the Respondent JBVNL as despite various requests made by the Petitioner, the Respondent JBVNL has neither released the aforesaid amount till date nor TDS certificate under Income Tax law has been issued by the Respondent JBVNL in order to entitle the Petitioner to take TDS credit of the aforesaid amount.

iii. For the issuance of any other appropriate writ (s) or direction(s) or order(s) as this Hon’ble Court may deem fit and proper in view of the facts and circumstances of the case for doing conscionable justice to the Petitioner.

2. The petitioner-Firm is registered under the Companies Act, 1956 and engaged in the business of providing comprehensive engineering, procurement and construction services to the Core sector industries in India. It has challenged the action of the Jharkhand Bijli Vitran Nigam Limited (JBVNL) in deducting Rs.2,90,32,000/- from the running account bills raised against the supply of materials.

3. The petitioner-Firm was selected for the rural electrification works under Deen Dayal Upadhyaya Gram Jyoti Yojna in XIIth Plan for Giridih, Bokaro and Dhanbad. Later, the JBVNL issued the Letters of Award vide (i) Letter of Award for supply of materials being, LoA No. 01/RE dated 5th February 2016, LoA No. 03/RE dated 5th February 2016 and LoA No. 05/RE dated 5th February 2016 for the projects at Giridih, Bokaro and Dhanbad and (ii) Letter of Award for erection and civil works being, LoA No. 02/RE dated 5th February 2016, LoA No. 04/RE dated 5th February 2016 and LoA No. 06/RE dated 5th February 2016 for the aforementioned districts in the State of Jharkhand. The JBVNL started deductions @ 2% from the running bills raised by the petitioner-Firm for the supply of materials and retained Rs.2,90,32,000/- on the pretext of “Income Tax Contingency”. Through several communications, the petitioner-Firm requested the JBVNL to release the amount so withheld as Income Tax contingency and also informed the JBVNL that the amount withheld by it is not reflected in Form-26AS. Notwithstanding that, the JBVNL did not release the illegally deducted amount nor deposited the said amount with the Income Tax Department.

4. The JBVNL takes the ground that it made deductions @ 2% from the running bill of the petitioner-Firm and the amount of Rs.2,90,32,000/- has been “kept back” to safeguard its interest. It has pleaded that the “kept back” amount shall be released or the TDS certificate will be issued depending on the outcome of the appeal preferred by the JBVNL against the demand notice dated 10th October 2017. In the counteraffidavit, the JBVNL referred to the notice under section 201 of the Income Tax Act, 1961 and the demand notice that includes the fine and a penal interest for the violation of the provisions for TDS deductions. This is stated that against the demand notice the JBVNL has filed an appeal before CIT (Appeal) on 5th December 2017 vide Form No.35; Acknowledgment No. 325620911051217.

5. The JBVNL took the following stand in its counter-affidavit :

5. That it is stated and