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TDS: deduction cannot be recovered from employee

QUESTION: I am a lecturer in a Government college. For the 2000-01 financial year I have claimed tax deduction under Section 80DDB (Rs. 40,000). My tax return was also filed and accepted by the income-tax authorities. As per the Income-tax Act in force at that time mere production of Form 10(1) was sufficient. I do not keep medical prescription and medical receipts. I cannot produce duplicate certificates now. Now, our employer (principal) starts recovering the tax deducted amount of Rs. 12,500 in five monthly equal instalments from the month in 2004 salary citing the objection raised by the AG's office (Audit) I Inspection Report. Is it correct to recover the deduction for 2000-01 financial year, for which my income-tax return was accepted by the IT Department. Whether AG's office has authority to order, now recovery of income-tax deduction for 2000-01 financial year? What are the implications of this deduction? Am I to resubmit a revised return? How can I produce duplicate certificates? In which account the deducted IT will be credited? Whether the IT Office will accept it?

ANSWER: Sec. 80DDB allows deduction of Rs. 40,000 (Rs. 60,000 for senior citizens) for medical treatment of specified diseases or ailments. Where a declaration is made by an employee that he has actually spent the amount, the person responsible for deduction can take the same into consideration. If an amount in excess of actual expenditure had been claimed, according to the perception of the employer, in the declaration of the employee, such declaration need not have been accepted by the employer at the time of deduction.

After having accepted the same, it is not open to the employer now to reconsider the deduction years after the deduction. The proper course is to apprise the employee of Audit note and leave it to the employee to file return and pay the difference to tax, if there had been any mistake on his part in the original claim. The inference of the AG's office that the claim for deduction reckoned for tax deduction purpose by the employer is merely an opinion.

At any rate, the presumed short deduction cannot now be recovered by the employer. But, where the employer has acted on the declaration of the employee, the employer cannot be held responsible for any short deduction arising out of the wrong declaration by the employee. The employee has no means of getting back the money from the Income-tax Department on the basis of the tax deduction certificate issued in a later year long after the date on which the employee could file a return or revised return and claim adjustment of tax.

What is expected of the employer is deduction of tax at source and not assessment and collection of tax, which can be done only by the assessing officer. The employer is not, therefore, justified in withholding payment of salary on the assumed short deduction in a later year. However, if it has been done as reported by the reader, he can contest that the recovery to be unwarranted and at the same time should insist upon tax deduction certificate and file a belated refund claim with a petition for condonation of delay, if he is eligible for relief under Sec. 80DDB.

However, there is responsibility on the assessee to indicate that the amount of Rs. 40,000 is actually spent on treatment, if he either asks for refund or the assessing officer initiates action by issue of notice under Sec. 148, because Sec. 80DDB allows relief only to the extent of the actual expenditure, but not exceeding Rs. 40,000 in treatment of specified ailments. But the inference that it can be proved only by bills and vouchers is not correct. There should be some secondary evidence suggesting a strong probability of expenditure not being less than of Rs. 40,000.

S. Rajaratnam

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TDS: deduction cannot be recovered from employee

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