Whether the department could again recover tax from the deductor of tax at source on income which has been fully assessed in the hands of the deductee recipient?
The assessee company hired warehouse for the sale of the soft drink and deducted TDS on warehouse charges. The TDS deducted at 2% under section 194C. The assessing officer held that warehouse charges were in the nature of rent and tax ought to have been deducted at 20% under section 194I. Meanwhile, the lesser has been fully assessed on its income and claimed the refund of the tax. The assessing officer having held the assessing company in default for the shortfall in the amount of TDS wants to recover the shortfall and interest thereon from the deductor company. So he rejects the claim of refund and ordered fresh claim of the tax.
Under circular number 275/201/95/IT(B) dated 29-1-1997, it declares that no demand visualized under section 201(1) should be enforced after the deductor has satisfied the officer in charge of TDS that tax due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) till the date of payment of taxes by the deductee-assessee. [Hindustan Coca cola beverage (P) ltd. Vs. CIT (2007) 163 TAXMAN 355 (SC).]