Department of Labour blocking of funds of Rs. 15.95 crore and consequential loss of interest of Rs. 2.73 crore.

Department of Labour (Delhi Building and Other Construction Workers’ Welfare Board). Non-claiming of refund of TDS. Failure of the Board to file income tax returns and claim a refund of tax deducted at source (TDS) by banks, resulting in blocking of funds of Rs. 15.95 crore and consequential loss of interest of Rs. 2.73 crore, which could have been earned had the refund of TDS been claimed timely and invested in Fixed Deposits in banks.

The Delhi Building and Other Construction Workers’ Welfare Board (the Board) was constituted on 02 September 2002 under the Delhi Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 with a view to providing and monitoring social security schemes and welfare measures for the benefit of building and other construction workers.

Audit scrutiny of records during August/September 2016 covering the period 2013-16, revealed that the Board applied to the Income Tax Department for registration under Section 12A of the Income Tax (IT) Act, 1961 (exemption from taxation) on 29 September 2008. The registration under Section 12A read with Section 12AA was granted to the Board from the assessment year 2009-10 onwards for exemption from taxation. However, the exemption from taxation was subject to satisfaction of the Assessing Officer about the genuineness of the activities promised or claimed to be carried on in each financial year relevant to the assessment year. Besides, the Board was required to maintain and submit its audited accounts to the Assessing Officer.

The Board invests its surplus funds as ‘Fixed Deposits (FDs)’ in various banks, which deduct tax at source (TDS) on interest earned on FDs. However, the same can be claimed as a refund from the Income Tax Department by filing an IT Return under section 139 (1) of the IT Act. Further, Section 244A(1)(a) states that “where refund of any amount becomes due to the assessee under the Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner:

“where the refund is out of any tax collected at source under Section 206C or paid by way of advance tax or treated as paid under Section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half percent for every month or part of a month comprised in the period,

(i) from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section (1) of Section 139; or

(ii) from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i).

Test check of records revealed that the Board earned Rs. 143.64 crore as interest on its FDs in banks during the period 2009-10 to 2015-16 and banks deducted Rs. 15.95 crore as tax at source on the interest earned on FDs. However, the Board could not claim a refund of this amount of TDS as it did not file the IT Return for any of the assessment years as of September 2016, resulting in TDS amounting to Rs. 15.95 crores lying with the IT Department unclaimed.

Thus, the failure of the Board to file IT Returns and claim a refund of TDS resulted in the blocking of funds of Rs. 15.95 crore and consequential loss of interest of Rs. 2.73 crores up to 31 March 2016, which could have been earned had the refund of TDS had been claimed timely and invested in FDs.

The matter was referred to the Government on 05 December 2016, their reply was awaited.