Section 203

Section 203 — the law in short

What the courts have decided on section 203, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Manohar Ramabtar Jhunjhunwala v PCIT High CourtHelps taxpayerNo later treatment found
  My employer deducted tax but never deposited it, so the credit was denied on processing, a demand now sits on the portal and my later years' refunds are being eaten by it. Do I get the credit and the refund, or only a promise that nobody will recover from me?
  You get the credit and the refund, not merely a bar on recovery. A Division Bench of the Bombay High Court, hearing a batch of such petitions with the assistance of an amicus, held that where an assessee establishes that tax was in fact deducted at source, the Department must grant appropriate TDS credit and cannot recover the corresponding amount from the deductee directly or indirectly, that the consequential relief including refund must follow, and that pending disposal of a credit application the demand must be marked in the system as stayed or not recoverable so that no coercive recovery or refund adjustment takes place.
• Munchener Ruckversicherungs Gesellshaft AG v CIT (International Taxation) High CourtHelps taxpayer
  The deductor credited the TDS late, so it turned up in 26AS only after I had filed. The department says I should have revised my return, and refuses credit because I never offered the income to tax. Is there a way back?
  Yes - s.155(14). The Delhi High Court held that s.155(14) places the Assessing Officer under a statutory obligation to amend the assessment or intimation once the certificate or the updated Form 26AS is produced, and that the sub-section neither contemplates nor mandates the original return being amended or revised. It also held that the Commissioner was wrong to require the income to be offered to tax where the assessee had consistently and uncontestedly said the receipt was not taxable in India.
• Kenneth Malcolm Holland v DCIT (International Taxation), Gurgaon High CourtHelps departmentNo later treatment found
  My client is a US national who came to India to teach and wants the two-year professors' exemption in the treaty. He has no Tax Residency Certificate from the US and the department will not give him an Indian one. Can he still claim the exemption?
  No. The Punjab and Haryana High Court held that a non-resident claiming relief under a treaty is hit by s.90(4) unless he obtains a certificate of residence from the government of the country of which he claims to be resident, and that a passport, an appointment letter and Form 16 are no substitute. The department's order, recited at para 4 and left undisturbed, had also said that under Rule 21AB(3) it is a person resident in India who may apply to the Assessing Officer for a certificate of residence, so that a non-resident cannot obtain an Indian TRC; the Court dismissed the writ on s.90(4) alone and made no finding of its own on that rule.
• Naresh Bhavani Shah (HUF) v CIT High CourtHelps taxpayer
  The HUF's money was invested in the karta's own name, so the TDS certificate and the 26AS entry carry his individual PAN. The HUF offered the interest to tax and the karta claimed no credit. The department says PAN mismatch, no credit. What now?
  The credit was directed to be given to the HUF. The Court held that the ordinary route is Rule 37BA(2) - the deductee files a declaration with the deductor, and the deductor issues the certificate in the name of the person entitled to credit - and that this procedure must invariably be completed before credit can be claimed where the certificate shows someone else's name and PAN. But it also held there is no dearth of power in the department to give credit in a genuine case, and on these special facts it directed credit on the karta filing an affidavit that the money and the income were not his and that he had claimed no credit.
• Court On Its Own Motion v CIT High CourtHelps taxpayer
  CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
  Taking up the problem on its own motion, the Delhi High Court issued directions on both limbs. A TDS claim supported by the deductor's certificate is not to be rejected merely because the uploaded information does not tally, and unmatched challans are to be verified and corrected within a fixed time. And s.245 is a two-stage provision: prior intimation of the proposed adjustment, a reply from the assessee, consideration of that reply by the Assessing Officer, an order under s.245, and communication of the outcome. A computerised set-off without that sequence does not comply with the section.
• Yashpal Sahni v Rekha Hajarnavis, ACIT High CourtHelps taxpayer
  My employer deducted TDS from my salary, never paid it to the Government and never gave me a Form 16. The Department is now recovering that tax from me. Can it?
  No. The Bombay High Court held that section 205 bars a direct demand on the assessee to the extent tax has been deducted at source, and the bar operates the moment deduction is established. Whether the deductor paid the money over, and whether a Form 16 was issued, are both irrelevant to the bar. The Act gives the Department complete machinery against the deductor - section 201 default, interest, a charge on its assets, penalty under section 221 and prosecution under section 276B - and that is the only route open. Rs 17,89,587 recovered by attaching the employee's bank account was ordered refunded with interest at six per cent.
• ACIT v Om Prakash Gattani High CourtCuts both ways
  The deductor deducted my tax and never deposited it. The Assessing Officer says he cannot give me credit until the money reaches the treasury, and has attached my bank account. Is he right on both counts?
  He may be right on the first and is wrong on the second. This is the foundational decision holding that s.205 bars any recovery from the deductee once tax has in fact been deducted, whether or not the deductor paid it over - the garnishee notices under s.226(3) were quashed - while at the same time holding that credit under s.199 is contingent on the tax being paid to the Central Government, so the Assessing Officer's note withholding credit until proof of payment was allowed to stand.
• Bhura Mal Raj Mal v CIT High CourtHelps taxpayer
  The officer has passed a s.154 order shifting my TDS credit to the next year because the payer's accounting year is different from mine. Can he do that by rectification?
  No. The Rajasthan High Court held that the credit belongs to the year in which the income is assessed in the recipient's hands, not the year fixed by the payer's accounting year or the date on the certificate, and in any event the point was at best debatable, so s.154 could not be used at all. The consequential withdrawal of s.214 interest and charging of s.215 interest also fell.
• CBDT Instruction No. 5/2013 — TDS credit where 26AS does not match CBDT Circulars & InstructionsHelps taxpayer
  Form 26AS does not show my TDS but I hold the deductor's certificate. Must the officer still verify and give me credit?
  Yes. Issued to give effect to the Delhi High Court's directions in Court On Its Own Motion v. CIT [2013] 352 ITR 273 (Delhi), the Instruction tells the assessing officer that where the assessee produces the TDS certificate as evidence against a mismatched amount, the officer must verify whether the deductor has paid the tax into the Government account and, if he has, give the credit. The Allahabad High Court has since decided a refund case on the strength of it.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.