---------- Forwarded message ----------
From: Parthiv Mehta <parthivtmehta@gmail.com>
Date: Wed, Jul 20, 2011 at 11:51 AM
It's July again, the time of the year when every taxpayer has to
discharge his/her obligation of filing annual returns. For most
salaried people, the process is essentially straight, whereby the
details of salary income and the taxes deducted thereon every month is
furnished to the Income Tax (I-T) Department in the prescribed form
and, more often than not, there is no additional tax payable by the
employee.
But, what if the taxes deducted at source (TDS) from an employee's
salary is not paid by the company into the government treasury? In
such a case, can the department recover the tax amount (along with the
applicable interest and penalties) from the employee?
There was a case in this regard, decided some time earlier by the high
court at Mumbai in the case of taxpayer Yashpal Sahni versus assistant
commissioner, I-T. Sahni was paid salary along with other benefits
after a total TDS of Rs 666,000. Accordingly, in his return for the
said year, the payer filed the return of income after claiming credit
for the TDS as above. When the returns were processed by the I-T
officer, the credit for TDS was denied and a total demand of about Rs
12,73,000 (including tax and interest under various provisions) was
raised.
Sahni applied for rectifying the said demand, saying the TDS amount so
deducted from his salary should be recovered from the company and, in
any event, the credit for the TDS along with the interest could not be
recovered from him. However, the department further imposed a penalty
on Sahni, raising the total demand to about Rs 17,90,000. In response,
Sahni appealed to the high court.
During the proceedings, the taxpayer's representative argued that once
the company had deducted TDS from the salary, this could not be
recovered from the former. It was the duty of the deductor to provide
the TDS certificate to the taxpayer, to enable him to claim credit for
the TDS so deducted. The I-T Act has the necessary provisions to levy
and recover interest from the company for the period the TDS was
deducted but not deposited in the government account. It could also
levy a penalty and the company was liable to punishment under the Act.
VERDICT & WHY
The court said it was the employer's responsibility to employees to
deduct the applicable tax at source on their income at the applicable
rates. Further, such taxes had to be paid to the credit of the central
government within the prescribed time limit. In case the company
defaulted on depositing the TDS collected, it shall be liable to pay
interest at the prescribed rate on the tax amount. Also, the Act had
enough provision to both punish the defaulter and recover the TDS from
the person who had deducted it.
The HC also noted Section 205 of the I-T Act said that where tax was
deductible at source, the taxpayer shall not be called upon to pay the
amount himself to the extent of deduction. The court deduced from the
language of this section that once it was established that the tax had
been deducted at source from the salary of the employee, the bar under
Section 205 comes into operation.
It matters not whether the tax deducted at source was paid to the
central government or not, because elaborate provisions are made under
the Act for recovery of TDS from the person who did the deduction. In
this case, Sahni had furnished monthly pay slips and bank statements
to show that the employer had deducted taxes at source from his
salary; the department hadn't disputed this.
In the absence of the TDS certificate being issued to the taxpayer,
said the court, it may not be possible to give credit for the TDS to
him. Still, if he was made to pay the tax again, it would amount to
double taxation, which was illegal. The fact that the employer had not
issued the TDS certificate to the employee did not mean the liability
ended. The liability to pay income tax, if deducted at source, was on
the employer. And, even if the credit of the TDS amount was not
available to the taxpayer for want of the TDS certificate, the fact
that the tax had been deducted at source from his salary would be
sufficient to ensure the department could not recover the amount with
interest from him again. The department was asked to refund the demand
amount paid by the former (at the time of filing the appeal to the
court), along with the prescribed interest.
This case should be noted by taxpayers.
To summarise:
* Preserve your monthly pay slips till at least the time you get
Form 16 for the year;
* If Form 16 isn't received, you can file your returns on the
basis of the pay slips;
* The employee can get credit for the TDS if deducted, even if
Form 16 is not available;
* The employee need not worry about paying taxes again on the
income just for want of Form 16.
The writer is a certified financial planner(Arvind Rao)
--
Regards,
CA Parthiv Mehta
From: Parthiv Mehta <parthivtmehta@gmail.com>
Date: Wed, Jul 20, 2011 at 11:51 AM
It's July again, the time of the year when every taxpayer has to
discharge his/her obligation of filing annual returns. For most
salaried people, the process is essentially straight, whereby the
details of salary income and the taxes deducted thereon every month is
furnished to the Income Tax (I-T) Department in the prescribed form
and, more often than not, there is no additional tax payable by the
employee.
But, what if the taxes deducted at source (TDS) from an employee's
salary is not paid by the company into the government treasury? In
such a case, can the department recover the tax amount (along with the
applicable interest and penalties) from the employee?
There was a case in this regard, decided some time earlier by the high
court at Mumbai in the case of taxpayer Yashpal Sahni versus assistant
commissioner, I-T. Sahni was paid salary along with other benefits
after a total TDS of Rs 666,000. Accordingly, in his return for the
said year, the payer filed the return of income after claiming credit
for the TDS as above. When the returns were processed by the I-T
officer, the credit for TDS was denied and a total demand of about Rs
12,73,000 (including tax and interest under various provisions) was
raised.
Sahni applied for rectifying the said demand, saying the TDS amount so
deducted from his salary should be recovered from the company and, in
any event, the credit for the TDS along with the interest could not be
recovered from him. However, the department further imposed a penalty
on Sahni, raising the total demand to about Rs 17,90,000. In response,
Sahni appealed to the high court.
During the proceedings, the taxpayer's representative argued that once
the company had deducted TDS from the salary, this could not be
recovered from the former. It was the duty of the deductor to provide
the TDS certificate to the taxpayer, to enable him to claim credit for
the TDS so deducted. The I-T Act has the necessary provisions to levy
and recover interest from the company for the period the TDS was
deducted but not deposited in the government account. It could also
levy a penalty and the company was liable to punishment under the Act.
VERDICT & WHY
The court said it was the employer's responsibility to employees to
deduct the applicable tax at source on their income at the applicable
rates. Further, such taxes had to be paid to the credit of the central
government within the prescribed time limit. In case the company
defaulted on depositing the TDS collected, it shall be liable to pay
interest at the prescribed rate on the tax amount. Also, the Act had
enough provision to both punish the defaulter and recover the TDS from
the person who had deducted it.
The HC also noted Section 205 of the I-T Act said that where tax was
deductible at source, the taxpayer shall not be called upon to pay the
amount himself to the extent of deduction. The court deduced from the
language of this section that once it was established that the tax had
been deducted at source from the salary of the employee, the bar under
Section 205 comes into operation.
It matters not whether the tax deducted at source was paid to the
central government or not, because elaborate provisions are made under
the Act for recovery of TDS from the person who did the deduction. In
this case, Sahni had furnished monthly pay slips and bank statements
to show that the employer had deducted taxes at source from his
salary; the department hadn't disputed this.
In the absence of the TDS certificate being issued to the taxpayer,
said the court, it may not be possible to give credit for the TDS to
him. Still, if he was made to pay the tax again, it would amount to
double taxation, which was illegal. The fact that the employer had not
issued the TDS certificate to the employee did not mean the liability
ended. The liability to pay income tax, if deducted at source, was on
the employer. And, even if the credit of the TDS amount was not
available to the taxpayer for want of the TDS certificate, the fact
that the tax had been deducted at source from his salary would be
sufficient to ensure the department could not recover the amount with
interest from him again. The department was asked to refund the demand
amount paid by the former (at the time of filing the appeal to the
court), along with the prescribed interest.
This case should be noted by taxpayers.
To summarise:
* Preserve your monthly pay slips till at least the time you get
Form 16 for the year;
* If Form 16 isn't received, you can file your returns on the
basis of the pay slips;
* The employee can get credit for the TDS if deducted, even if
Form 16 is not available;
* The employee need not worry about paying taxes again on the
income just for want of Form 16.
The writer is a certified financial planner(Arvind Rao)
--
Regards,
CA Parthiv Mehta
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