CIT V/s Marubeni India Pvt. Ltd. (2007) Archives

Employer is not liable to deduct TDS if Employee fails to provide salary detail of previous employer

Under section 192, the person paying the salary is liable to deduct the TDS. In case the employee was employed else were previously than it is sole responsibility of the employee to furnish the details of salary of previous employer to the current employer. If the employee fails to do so than the employer or assesse is not considered as assesse in default.

Fact of the Case: (CIT v/s Marubeni India Pvt Ltd)

In the given case the issue under consideration before the Delhi High court is whether employer is considered as assesse in default if the employee has failed to provide the details of the previous employer at the end of the year at the time of calculating the TDS.

Delhi High Court observation:

Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessed under this head for that financial year.

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The above provision indicates that the deduction of tax at source has to take place “at the time of payment” of such salary. Secondly, the tax that is required to be deducted would be the tax payable at the rates in force during that financial year “on the estimated income of the assessed” under the head salary for that financial year. The provision therefore envisages that the employer would proceed to deduct TDS on the estimated income. Where an assessed is employed simultaneously under more than one employer, he is required to furnish to the employer responsible for deducting tax at source “such details of the income under more the head ‘Salaries’ due or received by him from the other employer.” Section 192(2) further mandates that once that information is furnished “the person responsible for making payment referred to above shall take into account the details so furnished for the purposes of making the deduction under Sub-section (1).” The statutory scheme therefore appears to be that where an assessed has more than one employer, the liability of the employer who is expected to deduct TDS in terms of Section 192(1) would get triggered after the employee furnishes such employer the details of the income due or received by him from the other employer.

In the instant case it is not in dispute that the respondent company received the intimation from the expatriate employees as regards the payment received by them from other employer only in the month of March, 2000. The observation of the Dy. CIT that these expatriate employees were working exclusively only for the respondent company and no one else, does not mean that these employees did not receive payment from the other employer. In fact the Dy. CIT himself acknowledges this position in the next sentence where he says “whatever salaries they are getting in India or outside India is for the services to Deductor Company itself on its behalf.” What has, however, been missed by the Dy. CIT is that the provisions to Section 192(2) of the Act are attracted in such a situation and the liability to deduct TDS in terms of Section 192(1) arises after the information is provided by the employee in terms of Section 192(2). Therefore, in the facts of the instant case, it cannot be said that the respondent company was an assessed in default for the financial year 1998-99. There is no infirmity in the decision of the Tribunal in this regard.

Therefore, the court find no ground to interfere with the impugned order of the Tribunal. No substantial question of law arises. The appeals are accordingly dismissed.

Delhi High Court Decision:

The court observed that where an assesse has more than one employer liability of employer to deduct TDS arises only after employee furnishes to such employer the details of the income due or received by him from the other employer. There is no short deduction and the deductor is not an assesse in default.