Who is to claim credit of TDS?

Facts of the case

The assessee company entered into a foreign technical collaboration for Basic Engineering and Training (BEAT) Agreement with D, a foreign company, to set up a gas-based Sponge Iron Plant in India. In terms of the agreement, D was to deliver the designs, drawings, and data besides training a certain number of employees of the petitioner company outside India. In lieu of the services, it was agreed that in addition to the consideration, all tax liabilities of D, if any, arising in India shall be borne by the petitioner company.

The assessee- company sought no objection certificate from income tax authorities to remit the consideration payable to D without deducting TDS but the same was denied.

Subsequently, the assessee- company paid TDS under protest as withholding tax which was over and above the agreed consideration payable to D.

Later on, D filed its nil return of income in India for the same period but the Assessing Officer held that D had taxable income in India and accordingly, the withholding tax paid by the assessee- company was adjusted towards D’s tax liability.

Against such order, a writ petition was filed together by the assessee- company and D wherein on 5^th May 2010, the Bombay High Court rendered its judgment and held that such income was not taxable in India and further the income tax authorities were directed to pass fresh orders excluding the income received by D.

Subsequent to this order, the assessee-company requested the income tax authorities that it was entitled to refund of TDS deposited on behalf of D but the department refuted its claim by holding that since TDS was deposited on behalf of D and D had claimed the credit of such TDS deposited in its return of income, petitioner company was not entitled to such refund.

Analysis of facts:

The tax was deducted at source at the relevant time on behalf of D in accordance with Section 199 of the Act, credit can only be given to Davy and the benefit of the order of this Court rendered on 5 May 2010 can only be given to D who had filed its return of income for the A.Y.1990-91 and 1991-92.

It is, therefore, submitted that the assessee cannot claim a refund of tax deducted at the source which was deposited by the Petitioner on behalf of D, as there is no provision in the Act for the same.

It is submitted that the Assessee has no locus standi to claim a refund on behalf of D.

The order passed by the High Court & Conclusion

As regards the question of whether the petitioner is entitled to get such a refund, the Court is not expressing any opinion at this stage. However, the Court directs that if any amount deducted at source for the Assessment’s years 1990-91 and 1991-92 is required to be refunded to D pursuant to the judgment dated 5^th May 2010 in Writ Petition of this Court, the respondents shall deposit the said amount along with interest in accordance with the law in this Court.