Guidance on Claiming TDS Refund Post Merger

[Ramanathan Seshan]

Dear Experts,

Company A was merged with Company B in the financial year 2020-21, with Company B being the surviving entity. We had duly informed the banks about the merger and requested them to update their records accordingly. Despite this, the bank has continued to deposit TDS under Section 194A in the name of Company A for FY 2021-22 and subsequent years, up to the present date.

We have approached the bank multiple times, requesting them to revise their TDS returns, but they have not taken any action. Additionally, no assessments have been initiated for Company A for any of these years.

Given the above, we seek your guidance on how the TDS amount can be claimed. Is it possible to submit a manual refund request to the Assessing Officer? While issuing refund for company B, the amount has been excluded.

Regards,

S Ram

[YAGAY andSUN]

This is a fairly common and tricky post-merger issue where TDS continues to be deducted in the name of a non-existent/amalgamated company (Company A), instead of the surviving entity (Company B). Here's how you can resolve and/or mitigate the issue:

🧾 Issue Summary:

• Company A merged with Company B in FY 2020–21 (Company A no longer exists).
• Despite informing banks, TDS under Section 194A (interest) is still being deposited in the PAN of Company A.
• Company B is not receiving credit for the TDS in its 26AS/Traces and refund calculations.
• Bank has not revised TDS returns despite repeated requests.
• No assessment has been initiated for Company A in these years.

🛠️ Practical Resolution Strategy

✅ Step 1: Document the Merger

Ensure you have complete documentation of the merger:

• NCLT Order approving the merger.
• Intimations given to banks and other parties.
• PAN surrender/acknowledgment for Company A (if done).

This is crucial for substantiating your claim before the Jurisdictional Assessing Officer (AO).

✅ Step 2: Submit a Manual TDS Credit/Refund Request to AO

Under the Income Tax Act, specifically for situations like this, you can:

1. File a manual application to the AO (of Company B) along with:
   • Merger documents (NCLT order, board resolution, ROC filing).
   • TDS certificates (Form 16A) in the name of Company A.
   • Proof of income included in Company B’s return.
   • Bank correspondences asking for correction.
   • Affidavit or CA certificate confirming the merger and lack of duplicate claims.
2. Request the AO to allow TDS credit in the hands of Company B, even though it appears under Company A’s PAN in Form 26AS.

🔹 CBDT Circular No. 6/2017, dated 24.04.2017, and subsequent case laws allow relaxation in certain situations where technical mismatches exist, and the TDS credit is otherwise genuine.

✅ Step 3: File a Grievance on Income Tax Portal

If the AO is unresponsive, file an online grievance under the e-Nivaran section on the Income Tax Portal.

Attach:

• Detailed letter
• All supporting docs as above
• Request for AO direction to allow credit or force the deductor to revise their return

✅ Step 4: Legal Option (if needed)

If the AO refuses or remains silent:

• File a writ petition in High Court, especially if significant refund is stuck.
• Courts have ruled in favour of substance over form, particularly in merger scenarios.

🚫 What Not To Do

• Do not claim the TDS in Company A's return — it may be treated as invalid, and Company A is no longer a valid taxpayer.
• Do not claim the TDS in Company B’s ITR without AO's approval, unless the credit appears in Company B's Form 26AS (or via corrected TDS return by bank).

✅ Final Tip: Ask Bank to Revise TDS Returns (Again)

Send a final legal notice to the bank, enclosing merger documents and the default being committed, and warn of liability under Section 200A or 271H (penalties for incorrect TDS returns).

[Ramanathan Seshan]

Dear Yagay and sun-sir,

The said circular is that of POEM. Can you please share the exact circular number please.

Regards,

S Ram

[YAGAY andSUN]

Dear Mr. Seshan,

Thank you for your query.

The circular referred to is CBDT Circular No. 6/2017 dated 24.04.2017, which provides guidelines for handling cases where there is a mismatch in TDS credits, particularly due to technical errors such as PAN mismatches.

While this circular is not about POEM, it has been applied in several post-amalgamation scenarios to allow genuine TDS credit where deductors have continued to use the PAN of the amalgamated (non-existent) entity. The circular referred to in the context of allowing TDS credit in cases where the deductor has quoted an incorrect PAN (especially post-amalgamation) is not related to POEM (Place of Effective Management) but rather relates to TDS credit mismatches due to technical or procedural errors.

Usage in Post-Merger Cases:

Though the circular doesn't specifically reference amalgamations, its principles are widely used in merger cases where:

• TDS was deducted in the name of the amalgamated (non-existent) entity.
• The surviving company includes the income in its return.
• Proper documentation is submitted.

CBDT Circular No. 6/2017 dated 24th April 2017

Subject: “Processing of income-tax returns where there is a mismatch between the claim of TDS and TDS actually appearing in Form 26AS.”

Key Takeaways:

• Permits relaxation where TDS mismatch arises due to technical reasons (such as PAN mismatch, procedural errors).
• The AO is empowered to allow TDS credit if the deductee provides sufficient evidence, including TDS certificates and proof of income recognition.

This is supported by case law and practical precedent where courts and AOs have upheld substance over form in such technical mismatch cases.

We hope this clarifies the reference.

Warm regards,

Yagay & Sun

[Ramanathan Seshan]

Dear Yagay and sun-sir,

Requesting you to attach the link for the circular...

I have attached the circular number 6/2017 which talks about POEM

Regards,

S Ram

AI Summary

Corporate Name Change Impacts Tax Deduction: Merger Complications Require Strategic Documentation and Refund Request Process A company experienced continued TDS deduction under its old name post-merger, despite informing banks about the corporate restructuring. The surviving entity seeks guidance on claiming the TDS refund. Recommended steps include documenting the merger, submitting a manual refund request to the Assessing Officer with supporting documents, filing a grievance on the income tax portal, and potentially pursuing legal options if unresolved.