Taxmann Daily – Editorial Team
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Today’s newsletter analytically summarizes the top stories reported at taxmann.com.
MoU showing tax to be paid by another Co. isn't binding on AO; tax can be recovered from director if not paid by Co.: HC
The assessee was one of the directors of a private company, namely, RGC. A memorandum of understanding (MoU) was executed according to which all the company's income tax liability would be paid by another director of the company, namely, PD.
The Assessing Officer (AO) finalized assessment of the company and raised tax demand. However, PD failed to pay tax liability and also the company. Thus, he passed an order under section 179 against the assessee to recover the tax dues of the company. The assessee filed the writ petition before the Delhi High Court against such recovery.
The Delhi High Court held that section 179 imposes a vicarious responsibility on the directors for the company's dues. However, the primary condition is that the tax dues could not be recovered from the company before section 179 could be invoked. Thus, AO has to give a finding that the tax dues could not be recovered from the company before proceeding against the director.
In the instant case, there was a specific finding that despite issuing notices and attachment orders, the entire outstanding tax dues could not be recovered from the company leaving the AO with no other option but to recover the same from the directors.
Furthermore, Section 179 only permits recovery against a director and not against other group companies which are distinct legal entities. The MOU, settlement deed, and an arbitral award govern right in personam and cannot bind a statutory authority like the respondent-revenue. It is settled law that while rights in personam are arbitrable, rights in rem are unsuited for private arbitration and can only be adjudicated by the Courts or Tribunals.
Consequently, private parties cannot apportion Income-tax liability by private agreement as the assessee had sought to do in the instant case.
Central Govt. specifies ‘Jeevan Akshay-VII Plan’ of LIC as annuity plan for purpose of Sec. 80C deduction
Section 80C(2)(xii) allows deduction of the sum deposited in the annuity plans of the Life Insurance Corporation or any other insurer as the Central Government may specify.
The Central Government has specified the Jeevan Akshay-VII Plan of the Life Insurance Corporation of India as the annuity plan of the Life Insurance Corporation of India for section 80C(2)(xii).
Now, the following annuity plans are eligible for deduction under Section 80C:
(a) New Jeevan Dhara (LIC);
(b) New Jeevan Dhara-I (LIC);
(c) New Jeevan Akshay (LIC);
(d) New Jeevan Akshay-I (LIC);
(e) New Jeevan Akshay-II (LIC);
(f) New Jeevan Akshay-III (LIC);
(g) Jeevan Akshay-VI of LIC;
(h) Immediate Annuity Plan of ICICI Prudential Life Insurance Company Ltd;
(i) Easy Retire Annuity Plan of Tata AIG Life Insurance Company; and,
(j) Jeevan Akshay-VII of LIC.
That’s it from us for today! Stay Tuned for more updates from?Taxmann.com
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