Petitioner to be entitled to transition TDS under the TNVAT Act: HC

Petitioner to be entitled to transition TDS under the TNVAT Act: HC

Issue  

Writ Petition has been filed before Madras HC under Article 226 of the Constitution of India praying to Writ of Certiorari to call for the records on the files of the Respondent dated 28.02.2020 and quashing the same as illegal.  This Writ Petition has been filed by assessees under the Tamil Nadu Goods and Service Tax Act, 2017 (‘TNGST Act’) challenging notices issued by the respondent, Commercial Tax Authorities proposing the denial of transition of credit in respect of Tax Deducted at Source (TDS) in terms of Section 13 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT) in 10 cases, and orders confirming the aforesaid proposals, in 13 cases. 

Facts  

• All the petitioners are in the same position by collecting credits TDS in the era of TNVAT, also have been allowed to carry forward the same from years to years. 
• The petitioners sought transition of collected TDS into their respective accounts for set off against output tax - GST liabilities. 
• This has been denied under section 13 of TNVAT Act. 

Findings  

Section 13 provides, directing the deduction of tax at source, specifically excluded from its purview three categories of transactions, labor contracts, inter-state transactions, and exempt transactions that stand outside the pale of taxation. Section 13, thus passes the test of constitutionality and the inference that flows from this conclusion is that any amount deducted in line with the mandate of Section 13, have to be with the authority of law.  The provisions of Section 13(4) which says that the amount deducted and deposited under Section 13(2) will be adjusted by the Assessing Authority towards tax liability of the dealer, both under Section 5 or Section 6 and shall constitute good and sufficient discharge of such liability.  There is a distinction between the Income Tax Act and the Sales Tax Act insofar as the concept of carry forward of credit does not form part of the scheme of the IT Act. Under the IT Act, an amount paid as advance tax or amount deducted as tax will have limited use only qua the relevant assessment year. Advance tax is paid in four instalments, spread over the previous year relevant to an assessment year. Tax is deducted at source in regard to those transactions that have transpired during the financial year relevant to an assessment year. Such advance tax and TDS will be set off while computing the income relevant for that assessment year only and a refund of excess advance tax paid or a refund of excess tax deducted/collected at source will be determined in that assessment year itself.  This Court is of the view that any deduction made towards anticipated tax liability would assume the character of tax and will not change or fluctuate depending on whether it is held as credit or whether it is an adjustment against tax liability. To attribute such fluctuating character to an amount would distort the scheme of taxation and cause much difficulty in the interpretation on the various ancillary provisions.   Judgement   Madras HC set aside the impugned order, and the petitioners held to be entitled to transition TDS under the TNVAT Act in terms of Section 140 of the TNGST 2017.   To Read the Judgement Download the PDF Given Below: