Bombay High Court Rules If Employer Fails To Deposit TDS, Staff Not Liable To Pay It

Bombay High Court Rules If Employer Fails To Deposit TDS, Staff Not Liable To Pay It

The order provides relief to employees of companies who received related tax notices

The Bombay High Court has ruled that employees are not responsible for depositing tax deducted at source (TDS) if their employer, undergoing resolution under the Insolvency and Bankruptcy Code (IBC), fails to do it.

The order provides relief to employees of companies such as Byju's who received tax notices because they failed to deposit the TDS. Recently, employees of Tata Consultancy Services, India's largest IT services company, received income tax notices about discrepancies in their TDS.

The bench comprising Justice Somasekhar Sundaresan and Justice GS Kulkarni was hearing the writ petitions of several individuals.

The court ruled, "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 put on the employees.”

Citing the provisions of Section 205 and a Central Board of Direct Taxes office memorandum of 11 March 2016, the order read, "The mandate is clear that the assessee will not have to pay taxes that have been deducted from his income.”

Sandeep Jhunjhunwala, the tax partner at Nangia Andersen LLP stated, "The judgment 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.”