No Income Accrued to NR on Excess TDS Deposited by Assessee; HC Directs Refund of Same With Interest

Case Details: Tupperware India Pvt. Ltd vs. Commissioner of Income Tax (International Taxation) - [2024] 159 taxmann.com 532 (Delhi)

Judiciary and Counsel Details

• Yashwant Varma & Purushaindra Kumar Kaurav, JJ.
• Ananya Kapoor, Salil Kapoor & Sumit Lalchandani, Advs. for the Petitioner
• Prashant Meharchandani, Akshat Singh & Ms Ritika Vohra, Advs. for the Respondent.

Facts of the Case

The assessee-company was engaged in the manufacturing and trading moulded plastic items, which included import on a lease basis from overseas group companies. During the year under consideration, the assessee imported moulds from Dart USA under the Rental Agreement.

As per the agreement, the mould lease rent was agreed to be paid by the assessee based on actual production days. Due to the change in the method for charging rent on mould leases, the assessee deducted higher tax (TDS) on the revised estimate. However, the negotiations between the two companies didn’t materialize, which resulted in an excess tax deposit.

The assessee had made an application before the Assessing Officer (AO) for a refund of the higher tax deducted in accordance with the procedure enlisted under the CBDT circular dated 23-10-2007. However, no action was taken. AO contended that the assessee wasn’t entitled to the refund of excess TDS deposited by it, and only the payee would get the refund.

Aggrieved-assessee filed a writ petition before the Delhi High Court.

High Court Held

The High Court held that the cardinal duty of imposition or collection of taxes, which flows from Article 265, can only be exercised by the authority of law and not otherwise. The deliberations for increasing the rent did not materialize in the instant case. It was clearly established that no income had accrued to Dart USA qua the excess TDS paid by the assessee and, consequently, no right of retention of the said amount vests in the Commissioner.

Further, the court emphasized the procedure under the CBDT circular. The primary objective behind the circular was to lay down a procedure for refunding tax deducted under Section 195 of the Act in certain situations.

It was crystallized that by no prudent stretch of the imagination, the AO was entitled to withhold the excess TDS deposited by the assessee in lieu of the anticipated liability for the concerned AY, as the same would amount to tax collection without any authority of law. Accordingly, the writ petition was allowed to direct the issue of refunding excess TDS.

List of Cases Reviewed

• Indglonal Investment and Finance Ltd. v. ITO [2011 SCC OnLine Del 2609] (para 16)
• Union of India v. Tata Chemicals Ltd. [(2014) 6SCC 335] (para 17)
• Sunflag Iron and Steel Co. Ltd. v. CBDT [2016 SCC OnLine Bom 195] (para 18) followed