9911796707
TMI Blog2024 (1) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ses are as follows. The petitioner was employed with Tulip Telecom Ltd. (hereinafter referred to as "the employer") as Associate Vice-President during the period from November 2011 to May 2013 and resigned from service on 07.05.2013 with effect from 09.05.2013. For assessment years 2011-12 and 2012-13, the employer of the petitioner deducted Tax at Source (TAS) on the salaries paid to petitioner but the deducted tax pertaining to the assessment year 2012-13 was not deposited by the employer with the Income Tax authorities. The employer of petitioner also failed to issue the requisite TDS certificate, so the petitioner informed the concerned Income Tax Officials about the default, but no action was taken. The petitioner filed a petition seeking winding up of the employer company by way of Company Petition No. 192/2014 under Section 433(e)&(f) read with Section 434 of the Companies Act, in which liquidator was appointed. Instead of granting credit of the TDS pertaining to the assessment year 2012-13, the respondent/revenue issued intimation dated 03.12.2015, thereby raising demand of Rs.15,77,240/- against the petitioner towards outstanding tax liability. In response, the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue pertaining to Section 199 of the Act was also elaborately examined in the case of PCIT vs Jasjit Singh, 2023:DHC:8522-DB thus: "7. In this context, it is important to note that sub-section (3) of Section 199 of the Act alludes to the power invested in the Central Board of Direct Taxes (CBDT) to frame rules as to how credit in respect of tax deducted or tax paid in terms of Chapter XVII is to be given. [See Rule 37BA]. Significantly, the CBDT is empowered to frame rules that may be necessary to give credit to a person "other than those referred to in sub-section (1) and sub-section (2)..." of Section 199. Therefore, Section 199, read in its entirety, does not limit credit only to those deductees whose deductors have deposited the amount with the Central government. 7.1 Moreover, the expression "and paid" to the Central Government found in Section 199(1) must be contextualized in the setting in which it is placed, i.e., Chapter XVII, whereby, the sanctions for failing to deposit tax with the Central government are laid on the payor/deductor. 7.2 Section 199, which is contained in Chapter XVII and, inter alia, includes provisions for collection and recovery of tax. Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deducted by the payor, then the income is increased by the payor/deductor and offered to tax inclusive of the tax deducted at source. 8.5 Chapter XVII also contains provisions where, if tax is not deducted at source, it can be recovered from the payee. This is contained in Sections 191 and 202 of the Act. 8.6. Significantly, Chapter XVII contains provisions for penalizing the payor/deductor when he fails to deposit the tax deducted at source with the Central Government. For instance, the Act provides for consequences qua the person who is obliged to deduct tax at source but fails to do so or, after deducting fails to deposit the same. Under Section 201, such a person is deemed to be an 'assessee-in-default' and would, upon this eventuality occurring, be liable to pay interest [See sub-section (1A) of Section 201]. 8.7 Furthermore, the 'assessee-in-default' is also liable for imposition of penalty under Section 221 of the Act. Besides this, outside Chapter XVII, penalty can also be levied under Section 271C. 8.8 In addition, thereto, a person who fails to deposit tax deducted at source, under the provisions of Chapter VII-B, is liable for punishment with rigorous imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf. For convenience, the relevant part of the booklet is extracted hereafter: "4.2 Credit of TDS Where taxes have been deducted at source from any payment of income receivable by an assessee, the amount of tax deducted at source would be included in the income of the assessee while computing the income of the assessee and would be deemed to be the income received (S.198). Further credit will be given to the assessee while calculating the net tax payable by him and the tax deducted at source will be treated as a payment of tax on his behalf (i.e. to the Central Government by the payer who has deducted the tax at source (S.199))." [Emphasis is ours] 14. The Act has, thus, provided a regime as to how tax is required to be collected against certain payments. Once the deductee adheres to the statutory regime and allows the deductor to retain money towards tax, the nature of the amount cannot change and, therefore, the deductee, in our view, would be entitled to the credit of the amount retained by the deductor towards tax. Any other view would result in a situation where even though the assessee would have grossed up his income [by including the tax deducted at source] and off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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