No TDS Deductible on Decree/Arbitral Award: Calcutta HC Orders Refund, Denies Interest [Read Order]

The Calcutta High Court ordered the refund of tax deductible at source (TDS) and has reaffirmed that no tax is deductible at source from sums payable under a decree or arbitral award, unless expressly authorised by statute. The bench directed the Award Debtor to refund the TDS amounts erroneously deducted while releasing the decretal sum.

The case arose from an execution petition filed by the Award Holder, P.G. and W. Sawoo Pvt. Ltd seeking enforcement of an arbitral award dated 24 January 2024, read with an additional award dated 28 March 2024.

The arbitral tribunal had directed the Award Debtor to pay unpaid rent, mesne profits, service tax/GST, arbitration costs, and interest. The Award Debtor complied with the award by making payments in July and November 2025, but deducted tax at source (TDS) while releasing the decretal amounts.

The Award Holder challenged the deduction, arguing that such withholding was impermissible in law. The Court examined rival calculations furnished by both sides and found that the Award Debtor’s computation correctly reflected the directions contained in the arbitral award.

It was noted that the Award Holder was entitled to future interest only from the date of the additional award (29 March 2024) until the date of payment of the principal sum (23 July 2025).

On the issue of TDS, the Court relied on its earlier ruling in Neo Built Corporation v. Union of India (2023), which had categorically held that no tax is deductible at source from sums payable under a decree or arbitral award.

Justice Guarang Kanth observed that the Award Debtor had mistakenly deducted TDS amounts of ₹54,06,844 and ₹8,56,800 while releasing the decretal sum, despite the settled legal position. The Court directed that these amounts be refunded to the Award Holder within four weeks, without any interest.

The Award Holder had also sought interest on the deducted TDS component. This claim was rejected. The Court reasoned that the deducted amounts had already been deposited with the Income Tax Department in compliance with statutory requirements, and the Award Debtor had neither retained nor derived any benefit from them. Imposing an interest burden would penalize the Award Debtor for a bona fide procedural error, contrary to principles of equity and fairness.

Justice Kanth clarified that the Award Debtor is at liberty to approach the Income Tax Authorities to seek recovery or refund of the deposited amounts, in accordance with law and precedents such as S.S. Miranda Ltd. v. Shyam Bahadur Singh (1984). With these directions, the execution petition was disposed of.

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