TDS credit cannot be denied to an employee merely because the employer failed to deposit deducted tax.

Where tax is validly deducted at source from salary, the deductee employee cannot be denied TDS credit merely because the employer failed to deposit the tax with the Government. Chapter XVII places the obligation to deduct and remit tax on the deductor, while Section 205 bars the Revenue from recovering the same tax again from the assessee to the extent it has been deducted. The proper remedy lies against the deductor, though the employee may need to substantiate the deduction with supporting records. Credit was therefore required to be verified and granted accordingly.

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Issues: Whether credit of tax deducted at source could be denied to the employee merely because the deductor deducted tax from salary but failed to deposit it with the Government treasury.

Analysis: The employee had offered the salary income to tax and claimed credit for the tax shown as deducted in the salary records. The statutory scheme of Chapter XVII places the duty to deduct and deposit tax on the employer, while Section 199 links credit to tax deducted and paid to the Central Government. However, Section 205 creates a bar against direct demand on the assessee to the extent tax has been deducted from that income. Once deduction of tax at source is established, the employee cannot be made to suffer the same tax again merely because the deductor defaulted in depositing it. The proper course is recovery from the deductor, and the employee may be required to substantiate the deduction through supporting documents.

Conclusion: Credit of the TDS could not be denied to the assessee solely on the ground of non-deposit by the employer, and the matter was directed to be verified and granted accordingly, with recovery, if any, to be pursued against the deductor.

Ratio Decidendi: Where tax has been validly deducted at source from income, Section 205 bars the Revenue from recovering the same tax again from the deductee, even if the deductor fails to remit it to the Government.

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