The income tax act requires that credit be given for the amount of tax deducted at source, regardless of whether the tax was eventually deposited with the government. The assessing officer must allow the credit for tax deducted on salaries, even if the employer failed to deposit the amount with the government. The requirement for allowing credit is limited to the amount of tax deducted at source and does not depend on the subsequent deposit by the deductor.
Once tax has been deducted at source, the recipient of the payment (deductee) is entitled to the benefit of the tax deduction under section 143(1) of the tax code, regardless of whether the deductor subsequently deposited the tax with the government. In a recent case (Mukesh Padamchand Sogani v. ACIT), the tax authorities sought to deny the credit for tax deducted at source to the recipient because the employer had failed to deposit the tax with the government. However, the ITAT Pune ruled in favor of the recipient, holding that once tax has been deducted at source, the recipient is entitled to the benefit of the tax deduction, regardless of the deductor’s subsequent actions.
In this case, the employer had deducted a sum of 8,21,149 rupees from the salaries paid to the recipient for the year under consideration. Despite the fact that the employer failed to deposit the tax with the government, the ITAT Pune held that the recipient was entitled to the benefit of the tax deduction. The decision highlights the importance of giving credit for tax deducted at source, regardless of the subsequent actions of the deductor.
In conclusion, the tax code requires that credit be given for the amount of tax deducted at source, regardless of whether the tax was eventually deposited with the government. The requirement for allowing credit is limited to the amount of tax deducted at source and does not depend on the subsequent deposit by the deductor. Once tax has been deducted at source, the recipient is entitled to the benefit of the tax deduction, even if the deductor failed to deposit the tax with the government. This ruling serves as a reminder of the importance of giving credit for tax deducted at source and ensures that the recipient of the payment is able to receive the benefit of the tax deduction to which they are entitled.
