JBVNL's retention of Rs 2.9 crore TDS without depositing ruled illegal, ordered refund with interest

Jharkhand HC held that JBVNL's retention of Rs. 2,90,32,000 from contractor's bills as TDS deductions without depositing with Income Tax Department was illegal. Despite challenging TDS obligation before CIT (Appeal), JBVNL withheld amounts creating unjust enrichment. Court directed immediate issuance of TDS certificate and refund with interest, finding JBVNL's actions speculative and lacking bona fide. Imposed costs of Rs. 5 lacs on JBVNL recoverable from Managing Director for frivolous defense and unnecessary litigation.

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Issues Involved:
1. Issuance of TDS Certificate or Release of Deducted Amount
2. Legality of Withholding Amount by JBVNL
3. Compliance with Income Tax Provisions
4. Imposition of Cost on JBVNL

Summary:

1. Issuance of TDS Certificate or Release of Deducted Amount:
M/s. Anvil Cables Private Limited sought a writ of mandamus directing Jharkhand Bijli Vitran Nigam Limited (JBVNL) to issue a TDS Certificate for Rs. 2,90,32,000/- deducted as Income Tax @ 2% from the bills raised by the petitioner or alternatively, to release the deducted amount. The petitioner argued that despite multiple requests, JBVNL neither released the amount nor issued the TDS certificate, preventing the petitioner from claiming tax credit.

2. Legality of Withholding Amount by JBVNL:
JBVNL justified the deduction and retention of Rs. 2,90,32,000/- as "Income Tax Contingency" based on a notice u/s 201 of the Income Tax Act, 1961, alleging non-compliance with TDS provisions. JBVNL claimed the amount was "kept back" to safeguard its interest pending an appeal against the Income Tax Department's demand notice.

3. Compliance with Income Tax Provisions:
The Court examined the provisions of sections 201 and 203 of the Income Tax Act, which mandate the issuance of a TDS certificate upon tax deduction. JBVNL's failure to deposit the deducted amount with the Income Tax Department and its speculative withholding were deemed illegal. The Court highlighted that JBVNL had no authority to retain the amount as a "kept back" amount for litigation purposes.

4. Imposition of Cost on JBVNL:
The Court found JBVNL's actions arbitrary and without legal authority, resulting in unjust enrichment at the expense of the petitioner. The Court imposed a cost of Rs. 5 Lacs on JBVNL, to be recovered from its Managing Director, for dragging the petitioner into unnecessary litigation and causing business losses. The Court cited precedents emphasizing the need for imposing realistic costs to discourage frivolous litigation.

Conclusion:
The writ petition was allowed, directing JBVNL to release the withheld amount with interest as per clause 10.7.4 of the Jharkhand State Electricity Regulatory Commission, Ranchi (Electricity Supply Code) Regulation, 2015, and imposed a cost of Rs. 5 Lacs on JBVNL.

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