Forex

TDS certificates

S. Murlidharan

The issue raised in this article may seem meaningless to a lay person filing his or her income-tax return given the fact that all the forms prescribed for filing the return for the assessment year 2008-2009, the last date for which is upon us, explicitly ask the assessees not to attach any annexures to their returns, including TDS certificates.

This exhortation has the backing of Rule 12(2) of the Income-tax Rules 1962. Both the rules and the forms are the products of subordinate legislating authority, the Central Board of Direct Taxes (CBDT). In the event, one has to look to what Parliament, the parent legislative authority, has to say on the issue.
Not merely for record

Parliament has put off the requirement of not issuing TDS certificates by two full years vide the amendment made to Section 203(3) of the Income-Tax Act, 1961 by the Finance Act, 2008.

In other words, TDS certificates need not be issued only for tax deducted on or after April 1, 2010. For taxes deducted till then, TDS certificates have to be issued.

TDS certificates are issued not for record. It has a specific purpose — it must be attached with the return in proof of tax having been paid to that extent. This much is made clear by the legal provision dealing with returns — Section 139(9) — which deems returns not accompanied by such a proof, among other things, as defective.

The Explanatory Memorandum to the Finance Act, 2008 is candid enough to admit that the computerisation and networking efforts of the department have not progressed as desired so much so that the paperless dispensation envisaged to be ushered in from 2005 had to be put off twice before and now once again till 2010.

When the tax administration would be fully interlinked, TDS certificates would have outlived their utility as they would be available in a dematerialised form and accessible by officers of the department across jurisdictions.
CBDT’s excessive zeal

But that is still a long way off which is why Section 203(3) mandates issuance of TDS certificates till then and which is also why the Finance Act, 2008 has consciously amended Section 139(9) to delete the exemption — inserted as a sequel to the amendment to Section 203(3) — from attaching such certificates to the returns for tax deductions made after April 1, 2008. The points therefore are:

What explains the optimism of the CBDT that it would be able to verify the authenticity of the assesees as to their claims of tax having been paid vide TDS in the absence of any external or internal evidence;

Would the taxpayers be caught in the crossfire?

To be sure, the CBDT might turnaround and say that its newfangled powers under the new Section 199 that, among other things, vests it with the power to make rules for granting credit for tax deducted at source allows it the freedom to make the rule exempting taxpayers from attaching TDS certificates. But it would still beg the question: How on earth would it verify the claim of the taxpayers given the fact that Parliament has openly admitted the fact that the administration won’t be geared for this purpose till 2010?

The taxpayers curiously are armed with TDS certificates. Only they cannot be filed because even if filed the authorities have been instructed to return them at the time of accepting the returns.

The excessive zeal displayed by the CBDT is in fact an encore of what it did last year — mandating annexure-less returns. The taxpayers would therefore do well to preserve the TDS certificates if only to be able to produce them should the department in a belated realisation of its overreach and over enthusiasm call them upon to do so.