TDS credit under voluntary disclosure scheme must be allowed where the disclosed income was already taxed at source.

Tax deducted at source on income later disclosed under the Voluntary Disclosure of Income and Wealth Act, 1976 had to be treated as tax already paid on that income. Because the scheme did not expressly bar credit for such prior payment, and Sections 198 and 199 of the Income-tax Act treat TDS as tax paid on behalf of the assessee, the disclosed income could not be charged again in full merely because tax had been collected through deduction at source. The refusal to allow credit and adjustment was therefore set aside, and the declarant was entitled to have the TDS credited against the tax payable under the special scheme.

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Issues: Whether tax deducted at source from the disclosed income could be credited and adjusted against the tax payable under the Voluntary Disclosure of Income and Wealth Act, 1976.

Analysis: The declaration under the Voluntary Disclosure Act was made in respect of income that had already suffered deduction of tax at source. The scheme required payment of tax on the voluntarily disclosed income at the special rate prescribed by the Act, but it did not contain any express prohibition against giving credit for tax already paid on the same income. Sections 198 and 199 of the Income-tax Act, 1961 treat tax deducted at source as payment of tax on behalf of the assessee. The special scheme was intended to secure tax at the prescribed rate, not to exact more than that amount merely because the tax had been paid through deduction at source rather than direct payment. The reference to Section 7(2) of the Voluntary Disclosure Act did not exclude the normal treatment of tax already paid where it was not inconsistent with the scheme.

Conclusion: The petitioner was entitled to credit and adjustment of the tax deducted at source against the tax payable under the Voluntary Disclosure Scheme, and the refusal to grant such adjustment was set aside.

Ratio Decidendi: Where a special voluntary disclosure scheme does not expressly exclude prior tax already paid on the same disclosed income, tax deducted at source must be treated as tax paid by the declarant and credited against the liability under the scheme.

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