TDS done but not deposited by Deductor, can Deductee claim the credit?
As per the Income Tax Act, 1961 tax needs to be deducted at various instances by the person who incurs the expenditure. This concept is introduced to keep a watch on the individuals who incur income. If TDS is deducted the deductee have the right to claim the amount deducted as the tax credit.
In earlier days before e-filing, the deductor was allowed to issue the certificate of deduction to the deductee as soon as he used to deduct the amount from salary/ contract amount/ professional fees.
The deductee was allowed to claim the credit on the basis of the certificate. As per the judgement of Gujarat, Gauhati and Bombay High Court the credit of TDS can be claimed even if the deductor does not deposit the same with Government (the only condition is deduction certificate).
In the present e-filing scenario TDS certificate (Form 16 and Form 16A) can only be issued if the amount is deposited by the deductor to Government. So, in this case if the tax gets deducted but is not deposited to the Government by the deductor no certificate can be issued to the deductee.
Will the deductee be allowed to take the credit of TDS deducted but not paid in this case? This is a very genuine problem that the assessee suffers which needs clarification. In my opinion if the assessee proves the deductions, may be by producing the bank statements, pay slips, full and final settlement slips they shall be allowed to claim the credit.
No clear guidelines are available in this respect and it is the request to the Central Board of Direct Taxes (CBDT) to reproduce the clarification on the same.
In case of Goods and Services tax (GST), if GST is levied on the invoice and assessee has make the payment of the same to the supplier still he is not allowed to claim the ITC on the supply until and unless the supplier pays the amount of Tax to Government. Have a look at the article:
https://thetaxtalk.com/2018/10/11/itc-in-case-of-default-in-payment-of-tax-to-government-by-supplier/
