In recent cases of the law catching up with companies involved in tax defaults and delay in depositing the tax deducted at source (TDS) of employees with the government, directors of two companies - a construction firm and a hospitality entity - face six months' and one year's jail respectively. In another case, a court has ordered Rs 8 lakh fine on a company manufacturing plastic products for a similar offence.
The other two companies' whose directors face jail term have also been asked to pay fine for their offences. All the three court orders have come in the past two months, officials said while adding that these convictions would send strong signal to companies to comply with law.
Sharing the details of the court orders (TOI has the copies), the officer said Tis Hazari court in Delhi pronounced six months' rigorous imprisonment to the director of a construction company for tax default of Rs 60 lakhs for 2009-10 financial year, along with a fine of Rs 25,000. Moreover, the court has directed the company to pay Rs 25,000 fine for violating provisions relating to of TDS.

In the second case, a Delhi-based hospitality firm has been held guilty by the court for delay in depositing tax deducted in the government account within the prescribed time. "A total of about Rs 25 lakhs taxes deducted at source during 2008-09 and 2009-10 financial years was deposited in the government account a year later," said an official. The director of this firm has been convicted for 12 months of rigorous imprisonment. The company has also been fined Rs 1 lakh for the offence.

In the third case, a trial court has convicted a plastic products manufacturing company for committing default of TDS of Rs 79 lakh during three financial years, from 2008-09 to 2010-11. The lower court's order of Rs 8 lakh fine has been upheld by the session court which took cognisance of the alleged offence.

"The delay in payment of TDS causes undue hardship to taxpayers as their taxes are deducted but not deposited in the government account. Hence these tax payers find it difficult to claim the credit for their taxes," the official said.

As per Income Tax Act, all amounts deducted as income tax shall be paid to the credit of the central government within seven days from the end of the month in which the deduction is made. Failure to pay TDS attracts prosecution proceedings and once proved guilty, the offenders can face rigorous jail sentence up to seven years.

In order to avoid prosecution, the deductors have the option to compound the offence by offering higher penal interest. #casansaar (Source - Times of India)