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No TDS on money deposited with court

The Delhi High Court last week set aside the demand of the tax authorities which insisted that in cases where deposits were made in terms of directions issued by the court, the banks were required to deduct tax at source and issue tax deducted at source certificates. The CBDT had also issued a circular to that effect. The high court, in its judgment in the case, UCO Bank vs Union of India, struck down the circular on several grounds. "The circular," said the court, "proceeds on an assumption that the litigant depositing the money is the account holder with the bank and/or is the recipient of the income represented by the interest accruing thereon. This assumption is fundamentally erroneous as the litigant who is asked to deposit the money in court ceases to have any control or proprietary right over those funds. The amount deposited vests with the court and the depositor ceases to exercise any dominion over those funds. It is also not necessary that the litigant who deposits the money would be the ultimate recipient of those funds. The person who is ultimately granted the funds would be determined by orders that may be passed subsequently."

Article referred: http://www.business-standard.com/article/opinion/bifr-alone-to-decide-if-unit-has-revived-114111600838_1.html

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