2014 (10) TMI 293 - HC - Income Tax

Refund on TDS made - seeking refund of the amounts paid to the Income Tax Department by way of tax deduction at source (TDS), while effecting payment of compensation amounts to the Sub Court Held that - The T.D.S amounts were deducted from payments that were due pursuant to an award that was passed under the Land Acquisition Act - The TDS amounts were then paid over to the Income Tax Department - The compensation amount, as per the award passed in terms of the Land Acquisition Act was not actually paid but was deposited before the Sub Court, Thiruvalla which would have considered the reference applications, if any, preferred by awardees of compensation amounts - Subsequently, however, the award passed under the Act was set aside by this Court in proceedings that challenged the acquisition proceedings - where the payment of T.D.S, by the petitioners to the Income Tax Department, was not actually required but had already been effected at the time of payment of the compensation amount to the Sub Court, Thiruvalla - there is a detailed procedure that has to be followed for the purposes of getting a refund of T.D.S amounts erroneously paid - there was no tax that the 3rd and 4th respondents would have to pay to the Income Tax Department in respect of the compensation amounts. - Refund to be granted subject to verification that whether TDS credit was availed or not - Decided in favor of assessee.

Summary

Issues:
Refund of TDS paid to Income Tax Department in land acquisition proceedings.

Analysis:
The writ petition was filed by the District Collector and Special Tahsildar seeking a refund of the TDS amounts paid to the Income Tax Department while making compensation payments to respondents. The award passed in land acquisition proceedings was set aside due to a procedural error. The petitioners withdrew the compensation amounts deposited before the Sub Court and repaid it to the requisitioning authority. However, the TDS amounts paid to the Income Tax Department were not refunded. The 2nd respondent argued that the TDS payment was made in accordance with the Income Tax Act, and any refund required the deductee to file a return of income with the jurisdictional income tax authority.

The court noted that TDS amounts were deducted but the compensation was not actually paid to the respondents due to the award being set aside. As a result, the TDS payment to the Income Tax Department was unnecessary. Despite the detailed procedure under the Income Tax Act for refunding TDS amounts, the court found that since no compensation was received by the respondents, there was no tax liability for them to pay. Therefore, the court issued directions for the 1st and 2nd respondents to verify if credit was given to the respondents for the TDS payments. If not, the TDS amounts were to be refunded to the petitioners. If credit was given, the respondents were to repay the amounts to the petitioners. The respondents were given three months to complete the verification process as per the court's directions.