Employee Accepted Salary After TDS Deduction, Employer Responsible For Non-Deposit: Delhi High Court

The Delhi High Court has held that the employee accepted salary after TDS deduction and the employer is responsible for non-deposit of TDS.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the petitioner/employee, having accepted the salary after the deduction of income tax at source, had no further control over it in the sense that thereafter it was the duty of his employer, acting as a tax collecting agent of the revenue, to pay the deducted tax amount to the Central Government in accordance with law.

The petitioner/assessee was employed with Tulip Telecom Ltd. as Associate Vice President during the period from November 2011 to May 2013 and resigned from service on May 7, 2013, with effect from May 9, 2013. For assessment years 2011–12 and 2012–13, the employer of the petitioner deducted tax at source (TAS) on the salaries paid to the petitioner, but the deducted tax pertaining to the assessment year 2012–13 was not deposited by the employer with the Income Tax authorities.

The employer of the petitioner also failed to issue the requisite TDS certificate, so the petitioner informed the concerned income tax officials about the default, but no action was taken.

The petitioner filed a petition seeking the winding up of the employer company by way of a company petition under Section 433(e) and (f), read with Section 434 of the Companies Act, in which a liquidator was appointed. Instead of granting credit to the TDS pertaining to the assessment year 2012–13, the respondent or department issued an intimation by raising a demand of Rs. 15,77,240 against the petitioner for outstanding tax liabilities.

In response, the petitioner made various representations to the department, informing them about the defaults on the part of his employer. Ultimately, the department issued the demand notice by again raising a tax demand of Rs. 15,36,220 against the petitioner.

The department contended that the petitioner cannot be allowed credit for tax because the credit has to be given in view of Section 199 only when the tax deducted at source is paid to the Central Government, which was not so paid.

The court held that since the petitioner accepted his salary after deduction of income tax at source, it is his employer who is liable to deposit the same with the revenue authorities, and on this count, the petitioner cannot be burdened.

The court allowed the petition and set aside the demand notice. The department was directed to allow the petitioner credit for TDS deducted by his employer for the assessment year 2013–14.

Counsel For Petitioner: Sandeep D. Das

Counsel For Respondent: Gaurav Gupta

Case Title: Harshdip Singh Dhillon Versus Union Of India

Citation: 2024 LiveLaw (Del) 20

Case No.: W.P.(C) 10828/2019

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