TDS credit cannot be denied merely because the deductor failed to deposit tax, subject to verification of deduction.

Where tax has been deducted at source, section 205 bars direct recovery from the deductee to the extent of that deduction, and TDS credit cannot be denied merely because the deductor allegedly failed to deposit the tax with the Central Government. The assessee's entitlement does not depend on deposit particulars in the TDS certificate if deduction under Chapter XVII is shown, though the Assessing Officer may verify whether the statutory conditions were in fact satisfied. The claim for TDS credit was therefore allowed subject to verification.

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Issues: Whether the assessee was entitled to credit for tax deducted at source where the TDS certificates were shown to be defective and the deductor had not deposited the tax with the Central Government.

Analysis: The governing provisions make income-tax payable directly by the assessee only where no deduction is required or where tax has not been deducted in accordance with Chapter XVII. Where tax is deductible at source and has in fact been deducted, section 205 bars a direct demand on the deductee to the extent of such deduction. The deductee's entitlement does not depend on whether the deductor has remitted the amount to the credit of the Central Government. The TDS certificates produced showed deduction of tax under section 194-I, and the absence of deposit particulars in the certificates could not by itself defeat the assessee's substantive entitlement. The Assessing Officer was, however, permitted to verify whether the statutory conditions were actually fulfilled.

Conclusion: The assessee could not be denied TDS credit merely because the deductor had allegedly not deposited the deducted tax into the Government account. The claim was allowed, subject to verification by the Assessing Officer.

Ratio Decidendi: Once tax is deductible at source and has actually been deducted, section 205 prohibits recovery of that tax from the deductee, and the deductee cannot be denied TDS credit solely because the deductor failed to deposit the tax.

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