Law:

Section:

Section 179, read with section 220 of the Income-tax Act, 1961 - Company in liquidation - Liabilities of directors - Assessment years 1959-60, 1960-61 and 1963-64 - Whether section 179 is prospective in nature and there is nothing in its wording that would attract its provisions to previous year before commencement of Act on 1-4-1962 - Held, yes - Whether, therefore, petitioner, director of company in liquidation, could not be saddled with tax liability of company for assessment years 1959-60 and 1960-61 by resorting to section 179 - Held, yes - Whether, however, liability of petitioner to pay arrears of tax and interest thereon for assessment year 1963-64 was co-extensive with that of company and he could not escape liability for interest under section 220(2) - Held, yes FACTS A public company was converted into a private company in 1959, and then reconverted into a public company, ten year later in 1969. The company was assessed to income-tax, surcharge and corporation tax for the assessment years 1959-60 to 1963-64. As per resolution dated 9-7-1975, the company was in the process of voluntary winding up. The ITO served a notice dated 14-6-1976 upon the petitioner, being one of the directors of said company, proposing to recover from him the arrears of tax and interest thereon which was due from the company, by invoking the provisions of section 179. In response to this action, the petitioner filed his objections disputing his liability. By the order dated 31-8-1976, the ITO rejected the petitioner's objections and held that the petitioner was liable under section 179 for the amounts due from the company. On revision, the Commissioner dismissed the revision. Thereafter, the ITO issued certificates of recovery and on the basis of the certificates, the TRO served on the petitioner the notices of demand for recovery of the arrears of tax and interest thereon. On writ: HELD Section 179 imposes a vicarious liability upon the directors in respect of the tax arrears of the companies, although the companies themselves are entities independent of the directors. The liability is linked to the income of the previous year which has been assessed to tax. From its very…

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