2004 (12) TMI 76 - HC - Income Tax

TDS - deposit in credit of Central Government account - deductions u/s 192 and 194C in respect of the salary and sub-contractors payment - as per the two circulars of the Central Board of Direct Taxes New Delhi the deductions and deposits under sections 192 and 194C with the aforesaid officers at Kolkata out of salary and sub-contractors payments made at Balasore Orissa are in order. Hence such deductions and deposits under sections 192 and 194C from salary and subcontractors deductions made at Balasore Orissa were not required to be made at Balasore and deposited within the Income-tax Office TDS at Balasore - The impugned order passed by the Income-tax Officer (TDS)-cum-Tax Recovery Officer Balasore is quashed and the amount realised by the Income-tax Office (TDS)-cum-Tax Recovery Officer Balasore will be refunded to the petitioner together with the interest

Summary

Issues:
1. Interpretation of sections 192 and 194C of the Income-tax Act, 1961 regarding deduction and deposit of income tax.
2. Validity of the order passed by the Income-tax Officer (TDS)-cum-Tax Recovery Officer, Balasore.
3. Compliance with Circular No. 719 dated 22-8-1995 and Circular No. 744 dated 6-5-1996 issued by the Central Board of Direct Taxes, New Delhi.

Analysis:
1. The petitioner, Larsen and Toubro Limited, had its registered office in Mumbai and a regional office in Calcutta. The company undertook a project in Balasore, where deductions under sections 192 and 194C of the Income-tax Act were not made and deposited locally. The Income-tax Officer (TDS)-cum-Tax Recovery Officer, Balasore, issued an order under section 201 of the Act for non-compliance. The petitioner contended that deductions were made at the Kolkata regional office and deposited there, as affirmed in an affidavit by the Assistant Commissioner of Income-tax, Circle-58 (TDS), Kolkata. The High Court held that as per Circulars issued by the Central Board of Direct Taxes, deductions and deposits under sections 192 and 194C could be made at one office, and hence, the deductions made at the Kolkata office were in order.

2. The High Court quashed the order dated February 25, 2004, passed by the Income-tax Officer (TDS)-cum-Tax Recovery Officer, Balasore, as the deductions and deposits made at the Kolkata office were found to be in compliance with the law. The Court directed the refund of the amount realized by the Balasore office along with applicable interest to the petitioner by a specified date.

3. The affidavit filed by the Assistant Commissioner of Income-tax, Circle-58 (TDS), Kolkata, confirmed that the deductions made at the Kolkata office were in accordance with Circulars issued by the Central Board of Direct Taxes. The Court emphasized that the Circulars allowed for deductions and deposits to be made at a single office, validating the actions of the petitioner in this case.

This judgment highlights the importance of adherence to Circulars issued by regulatory authorities in interpreting and applying tax laws, ensuring that deductions and deposits are made in accordance with the prescribed procedures to avoid unnecessary penalization.