Delhi High Court Rules in Favor of Tax Credit for Deducted Tax at Source

Case Name:

The PR Commissioner of Income Tax - 15 vs. Jasjit Singh (ITA 295/2023)

Key Takeaways:

1. The respondent/assessee is entitled to tax credit for the tax at source deducted by the buyer of the shares, even if the buyer had not deducted TDS.
2. The Act does not cast a burden on the deductee/payee with regard to the deposit of money retained as tax by the payer/deductor.
3. Once the payer/deductor, who acts as an agent of the Central Government, has retained money towards tax, credit for the same cannot be denied to the deductee/payee.
4. The nature of the amount retained by the deductor towards tax cannot change, and therefore, the deductee would be entitled to the credit of the amount retained by the deductor towards tax.

Case Synopsis:

The case you have provided is a judgment from the High Court of Delhi at New Delhi, with the date of decision being 02.11.2023. The case is ITA 295/2023, between The PR Commissioner of Income Tax - 15 (Appellant) and Jasjit Singh (Respondent). The judgment was delivered by Hon’ble Mr. Justice Rajiv Shakdher and Hon’ble Mr. Justice Girish Kathpalia.

The case revolves around the issue of whether the respondent/assessee is entitled to credit concerning the tax which had been deducted with respect to the transaction entered into by him with Koutons Group. The respondent/assessee held 25% equity shares in a private limited company, S.R. Resorts Pvt. Ltd., and the total consideration fixed for this transaction was Rs. 19,89,96,655/-. After deduction of Tax at Source (TAS) at the rate of 10.3%, the respondent/assessee received Rs. 17,85,00,000/-. The tax in absolute terms, which was deducted by the buyer of the shares held by the respondent/assessee, was Rs. 2,04,96,655/-.

The issue at hand was whether the respondent/assessee is entitled to tax credit for the tax at source [TAS] deducted by the buyer of the shares, even though the buyer of the shares had not deducted TDS. The Tribunal ruled in favor of the respondent/assessee, stating that the respondent/assessee is entitled to tax credit for the tax at source deducted by the buyer of the shares, and the fact that the buyer of the shares has not deducted TDS will not come in the way of the respondent/assessee getting tax credit.

The appellant/revenue argued that credit for the said amount could not be given since the deductor, i.e., Koutons Group, had not deposited the said amount with the appellant/revenue. The appellant/revenue sought to place reliance on Section 199 (of Income Tax Act, 1961).

The court, in its judgment, referred to a similar assertion made in a previous case and concluded that the Act does not seem to cast a burden on the deductee/payee with regard to the deposit of money, which is retained as tax, by the payer i.e., the deductor. Therefore, insofar as the deductee/payee is concerned, once the payer/deductor, who acts as an agent of the Central Government, has retained money towards tax, credit for the same cannot be denied, having regard to the consequences and the modes available for recovering the said amount from the payer/deductor.

The court also emphasized that the Act has 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 would be entitled to the credit of the amount retained by the deductor towards tax.

In conclusion, the court held that no substantial question of law arises for consideration in the instant appeal and disposed of the appeal accordingly.

This judgment provides a detailed analysis of the provisions of the Income-tax Act, 1961, and the rights of the deductee/payee in cases where the deductor has not deposited the tax deducted at source with the Central Government.

FAQ:

Q1: What was the issue in the case?

A1: The issue was whether the respondent/assessee is entitled to tax credit for the tax at source deducted by the buyer of the shares, even though the buyer of the shares had not deducted TDS.

Q2: What was the ruling of the court?

A2: The court ruled in favor of the respondent/assessee, stating that the respondent/assessee is entitled to tax credit for the tax at source deducted by the buyer of the shares, even though the buyer of the shares had not deducted TDS.

Q3: What were the key considerations in the judgment?

A3: The judgment emphasized that the Act does not cast a burden on the deductee/payee with regard to the deposit of money retained as tax by the payer/deductor, and the nature of the amount retained by the deductor towards tax cannot change, entitling the deductee to the credit of the amount retained by the deductor towards tax.