| Case ID |
160b33c6-1ce5-42d1-8fa0-0e72d05a9e21 |
| Body |
View case body. Login to View |
| Case Number |
Writ Petition No. 6595 of 1998 |
| Decision Date |
Apr 01, 1998 |
| Hearing Date |
|
| Decision |
The High Court ruled that the liability of the directors of a private company arises only when the tax cannot be recovered from the company. The court emphasized that the Assessing Officer must establish that the tax cannot be recovered from the company before proceeding against the directors personally under Section 179 of the Income Tax Act, 1961. The proceedings initiated against the directors were quashed due to the lack of such a finding. Hence, the court allowed the writ petition, stating that the Assistant Commissioner could initiate fresh proceedings if a finding of non-recovery from the company was established. |
| Summary |
This case involved a writ petition filed by directors of Drill Rock Engineering Company (P.) Ltd. against the Assistant Commissioner of Income Tax regarding tax recovery liabilities. The core issue was the interpretation of Section 179 of the Indian Income Tax Act, 1961, which stipulates that directors are only liable for tax recovery if the company itself cannot fulfill its tax obligations. The High Court highlighted that the Assessing Officer must first determine that the tax is unrecoverable from the company before pursuing the directors for payment. The court found that the Assistant Commissioner had not established this necessary finding, leading to the quashing of the proceedings against the directors. This ruling underscores the protection afforded to directors under the Income Tax Act, ensuring that they cannot be held liable without due process being followed. The case is significant for corporate governance and tax law, emphasizing the need for clear jurisdictional findings before personal liabilities are imposed on company directors. |
| Court |
High Court
|
| Entities Involved |
Drill Rock Engineering Company (P.) Ltd.,
Consolidated Pneumatic Tools Company India Limited
|
| Judges |
MS. S. V. MARUTHI,
T. N. C. RANGARAJAN
|
| Lawyers |
P. Srinivas Reddy,
J. V. Prasad
|
| Petitioners |
another,
K.V. REDDY
|
| Respondents |
another,
ASSISTANT COMMISSIONER OF Income Tax
|
| Citations |
2000 SLD 77,
2000 PTD 943,
(1998) 232 ITR 306
|
| Other Citations |
Not available
|
| Laws Involved |
Indian Income Tax Act, 1961
|
| Sections |
179
|