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2014 (9) TMI 425 - HC - Income TaxLiability to pay tax by assessee - provision of section 205 - Failure of non-issuance of TDS certificates by the tenant - Whether Section 205 of the Income Tax Act would apply and is the Appellant liable to pay tax to the extent to which tax has been deducted Held that - Tax was deducted at source by the tenant Union Motors Services Limited and they have issued some Certificates which have been given credit to by the Department - the mandate is on the tenant to deduct tax at source and remit the amount to the Government and also issue certificate to the assessee relying upon Yashpal Sahni vs Rekha Hajarnavis, Asst. CIT (Bom.) 2007 (7) TMI 7 - HIGH COURT , BOMBAY - Once it is established that the tax has been deducted from the salary of the employee, the bar u/s 205 of the Act comes into operation and it is immaterial as to whether the tax deducted at source has been paid to the Central Government or not, because elaborate provisions are made under the Act for recovery of tax deducted at source from the person who has deducted such tax - the bar u/s 205 of the Income Tax Act prevents the department from demanding the tax deducted at source from the assesee who has suffered a deduction - the liability rests with the Official Liquidator Decided in favour of assessee.
Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal. 2. Failure to issue TDS Certificate by the tenant. 3. Interpretation of Section 205 of the Income Tax Act. 4. Liability of the Company in liquidation. Issue 1: Appeal against the order of the Income Tax Appellate Tribunal The appellant, a landlord, rented out a building to a tenant who deducted tax but failed to issue TDS Certificate or credit the amount to the Income Tax Department. The Assessing Officer did not give credit for the tax deducted at source as the appellant did not provide the TDS Certificate. The Commissioner of Income Tax (Appeal) upheld this decision, stating that the appellant had no appellate remedy, only an administrative one. The Income Tax Appellate Tribunal allowed the appellant to approach the Assessing Officer with necessary evidence, leading to the present appeal. Issue 2: Failure to issue TDS Certificate by the tenant The tenant's failure to issue TDS Certificates led to disputes regarding tax deductions. The Tribunal found the Appellate Authority's order sustainable but allowed the appellant to approach the Assessing Officer with evidence of tax deduction. The dispute primarily revolved around the non-issuance of TDS certificates by the tenant, which is a legal requirement under the Income Tax Act. Issue 3: Interpretation of Section 205 of the Income Tax Act Section 205 of the Income Tax Act states that once tax is deducted at source, no further demand can be raised on the deductee. The Bombay High Court and Karnataka High Court judgments highlighted the legal provisions regarding tax deduction at source and the consequences of failure to remit the deducted tax to the government. The courts emphasized that the liability rests with the deductor and not the deductee, providing protection to the assessee against undue demands for the deducted tax amount. Issue 4: Liability of the Company in liquidation The Official Liquidator of the tenant company, involved in litigation proceedings, was impleaded in the appeal. The Company in liquidation was not obligated to discharge the tax liability from the assessment period, as it was put under liquidation after the said period. The judgment clarified that the liability now falls on the Official Liquidator, and the Department can proceed against the company in liquidation by filing a claim for the tax amount in question. In conclusion, the High Court of Madras allowed the appeal, setting aside the Income Tax Appellate Tribunal's order. The judgment clarified the legal provisions regarding tax deduction at source, the liability of the deductor, and the protection provided to the assessee under Section 205 of the Income Tax Act. The involvement of the Official Liquidator in the case highlighted the shift in liability due to the company's liquidation.
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