refund of excess tds deposited

[Bijendar singh]

one of our client has deducted the tds u/s 194A on payment of intt to forest corporation.forest corporation is exempt from tds deduction. they want immediate refund of their tds instead of receiving form 16A and get refund afterwards filing their corporation return. I went to directorate commissionerate and to CIT also.show them section of refund of tds and circular claiming exemption from tds for corporation. they get involve in arguemnts instead of giving suggestion, instead they were unaware of this section. this is new type of problem of tds occuring in our jurisdiction.
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cicular ref no. 285,dated october 21, 1980

please suggest me regarding the practical applicability of this circular. also provide me relevant case laws or any guidance regarding this circular.

[Rama Krishana]

Department should obey and respect the circular no. 285, to grant refund of excess TDS deposited. It is a failure of the system in which assessee is not able to get the relief as provided in the law. 

[DEV KUMAR KOTHARI]

In case Forest Corporation has provided to you exemption certificate, before hand, then they are correct. However, if they did not provide you exemption certificate and you have deducted tax, then they cannot make a demand of refund from you for the amount of tax deducted by you and deposited. Besides liability of TDS, you also need to consider allowability of the sum from which tax is deductible.

In absence of exemption certificate provided to you beforehand, It is likely that your  ITO (TDS) and your AO both will try to argue that tax is deductible.

Better sort out issue in businesslike manner with Forest Corporation. In future tax may not be deducted, if valid exemption certificate is furnished by them.

In case Forest Corpn. provide you valid certificate for relevant period, and you have not issued TDS certificate, and you have scope of adjusting amount of TDS deposited against other TDS payable, you can consider the request of Forest Corpn.  

AI Summary

Tax deducted at source exemption: refund or adjustment may follow when a valid exemption certificate proves withholding was unnecessary. Refund of excess TDS is supported by Circular No. 285: where an exempt recipient has provided a valid exemption certificate before payment, TDS should not have been deducted and refund or adjustment is appropriate; absent such pre issued certificate the recipient's refund remedy is statutory refund unless parties agree adjustment, and the deductor may consider adjusting deposited TDS against other TDS liabilities if administratively feasible.