Delhi HC Orders Refund Where Employee Denied TDS Credit for Kingfisher’s Default

The petitioner, a salaried employee of Kingfisher Airlines, was issued an intimation under Section 143(1) dated 07.06.2013 for AY 2012–13, raising a demand of Rs. 12.28 lakh on the ground that TDS of Rs. 10.34 lakh deducted from his salary was not credited, as Kingfisher had failed to deposit the same with the Revenue.

The petitioner challenged relying on a recent Delhi High Court ruling holding that an employee cannot be denied TDS credit for the deductor’s default. The Revenue did not dispute the legal position but raised a preliminary objection on territorial jurisdiction, arguing that the petitioner had since shifted to Bengaluru.

Issue Raised: Whether an assessee can be denied credit of TDS deducted from salary merely because the employer failed to deposit the tax, and whether the later demand and recovery are sustainable.

HC’s Ruling: The Hon’ble High Court rejected the Revenue’s objection on jurisdiction, holding that jurisdiction must be seen as on the date of filing of the return and writ petition, when the assessing authority was admittedly in Delhi.

The Court held that even if Kingfisher Airlines failed to deposit the TDS, the petitioner could not be faulted or deprived of his lawful credit. The Court quashed the intimation under Section 143(1) to the extent it denied TDS credit, along with the later demand and recovery. The Revenue was directed to refund the amount recovered from the petitioner with applicable interest under Sections 244(1) and 244(1A) within three months.

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