Tax deduction demand and restitution: court-directed deposit had to be refunded after the underlying basis failed.

The demand directing deduction of tax at source lost its legal basis once the project area came within the assessing officer's jurisdiction and assessments were stated to have been completed, so it was invalid. The sum deposited under the interim order was not collected under any independent statutory power but only pursuant to the Court's direction, so the receiving authority could not resist restitution by citing later administrative inability to repay. Rule 59 of the Telangana Value Added Tax Rules, 2005 did not apply to retain the amount, because the payment was traceable to the court order rather than statutory collection authority; refund was directed.

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Issues: Whether the demand directing deduction of tax at source was without authority of law and whether the amount of Rs. 2 crores deposited pursuant to the interim order of the Court was liable to be refunded by the respondent.

Analysis: The demand for deduction of tax at source was held to have lost its basis after the project area came within the jurisdiction of the assessing officer at Gudur and assessments were stated to have been completed. The amount of Rs. 2 crores had been deposited not in exercise of any statutory power, but only because of the interim order of the Court. The fact that the receiving authority later claimed inability to repay could not defeat the petitioner's right to restitution, since a party receiving money under a court order cannot retain it merely because of subsequent administrative developments. Rule 59 of the Telangana Value Added Tax Rules, 2005, was held not to assist the respondent because the receipt itself was traceable to the court's order and not to an independent statutory collection power.

Conclusion: The demand directing deduction of tax at source was invalid, and the respondent was directed to refund the deposited amount of Rs. 2 crores to the petitioner.

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