Legally Bharat

The Bombay High Court on Wednesday ruled that employees are not liable for deposit of tax deducted at source (TDS) if the employer of a company undergoing resolution under Insolvency and Bankruptcy Code fails to do so.

The order comes as a relief to employees of companies such as Byju’s who had received tax notices because of the failure on the part of their employer to deposit TDS.

“When an obligation to deposit the tax, as in the present case, is on the employer and if the employer has defaulted, the liability to pay such tax cannot be shifted so as to be foisted on the employee,” said the bench of justices Somasekhar Sundaresan and GS Kulkarni.

The bench was hearing writ petitions of many individuals which it clubbed together in the hearing.

The high court in its ruling cited the provisions of section 205 and a Central Board of Direct Taxes office memorandum of March 11, 2016.

“The mandate of Section 205 is absolutely clear that the assessee shall not be called upon to pay taxes himself to the extent to which tax has been deducted from the assessee’s income,” the order said.

Earlier this month, employees of Tata Consultancy Services, India’s largest IT services company, received income tax notices about discrepancies in their TDS.

“This judgment from the Hon’ble Bombay HC comes at a crucial time and would be beneficial to many salaried employees, where their erstwhile employers have defaulted in the remittance of payroll withholding tax to the Income Tax Department,” said Sandeep Jhunjhunwala, tax partner at Nangia Andersen LLP.

  • Published On Sep 26, 2024 at 01:35 AM IST

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