Assessee cannot Claim Employer’s Liability to TDS on Foregone Salary as per Settlement Agreement before Accrual: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that assessee cannot claim or demand employer to remit the Deducted Tax at Source (TDS) with regard to foregone salary as per a settlement agreement signed between employer and employee before accrual of the same.

The appeal had been preferred by the assessee, against the order-in-appeal arising out of an order under Section 263 of  Income Tax Act, 1961 (hereinafter referred as ‘the Act’), against the order-in-original passed under Sections 201(1) and 201(1A) of the Income Tax Act by the Assessing Officer.

The appellant was working as Ex-Chief Manager, Oriental Bank of Commerce and the appellant was removed from the services of the Bank vide Disciplinary Proceedings.

He had challenged the same by way of a writ petition before Delhi High Court and the High Court had set aside the removal from service order and modified the punishment. The Delhi High Court had also entitled the assessee to pension, gratuity and leave encashment.

On the amount Rs. 22,01,608/- forgone by the appellant, as per the terms of settlement, the entries of deduction made by the bank towards TDS of Rs. 11,06,499/- was also reversed.

In appeal, the bank/assessee was issued notice and it submitted that the amount of Rs.11,06,900/- was part of arrears of wages which was foregone by the complainant as per settlement  agreement dated 05.08.2014. As the amount of wages was not payable to the appellant, the question of deduction and payment of TDS does not arise, the appellate authority held.

The bench observed that, “this appeal is maintainable by an ‘assessee’, however, the aforesaid discussion establishes that appellant is neither ‘assessee’ nor ‘assessee in default’. Therefore, the appeal preferred by him, against the order as “review order u./s 263 of the Income Tax Act, 1961” is not maintainable.

It was held that, even otherwise on merits it can be observed that Section 192 of the Income Tax Act provides deduction of tax ‘at the time of payment’ but in the present case, as admitted by the appellant, there was no payment of the salary etc, which was foregone as per terms of settlement in the mediation proceedings.

To Read the full text of the Order CLICK HERE

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