Law:

Section:

Section 201 of the Income-tax Act, 1961 - Consequence of failure to deduct or pay - Where employer of assessee paid TDS on perquisite value of stock options allotted to its employees which was subsequently recovered from respective employees, but later on, such deduction of tax was held to be not in accordance with law, employees were entitled to refund of amount of tax, even though there was delay in filing return [In favour of assessee] Based on demand raised by the Assistant Commissioner for the failure to deduct tax at source in respect of perquisite value of stock options allotted to its employees, who were covered by the Employees Stock Option Scheme (ESOS), the assessee's employer paid the tax under section 201(1) along with interest under section 201(1A), which was subsequently recovered by the employer from the respective employees. Later on challenge made by the employees, the Tribunal held that allotting of shares to employees did not amount to a perquisite, a liability under the Act to deduct tax at source. The assessee filed a petition for refunding the TDS amount along with interest along with a request to condone the delay in filing the returns. The Commissioner held that once the deduction of tax at source was held to be not in accordance with law, the amount of tax recovered should have been refunded to the employer company along with interest and rejected the petition to condone the delay in filing the return and to grant refund to the assessee-employee. On writ, the Single Judge, relying upon decision of the Karnataka High Court in S. Thigarajan v. Asstt. CIT [2010] 322 ITR 581, quashed the order passed by the Commissioner and directed him to refund the amount with interest payable as per the provisions of the Act. Held that in S. Thigarajan's case (supra), the Karnataka High Court has categorically held that it is an obligation cast on the revenue to effect the refund, without calling upon the assessee to apply for refund the claim. The department was not in a position to state as to whether the order of the Karnataka High Court had been reversed by the Supreme Court and, moreover, it was not in a position to place its hands on any other…

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