Law:

Section:

Section 281 of the Income-tax Act, 1961 - Certain transfers to be void - There were outstanding dues towards income-tax from assessee which she failed and neglected to pay - Assessee, however, with intent to delay or defeat Department executed trust and transferred certain amount to trustees for benefit of her grand children - Whether in view of provisions contained in section 281, deeds of settlement were void and not binding upon department - Held, yes FACTS There were outstanding dues towards income-tax from the assessee. She failed and neglected to pay the said sum assessed against her. She collusively with the intent of delay or defeat the creditors including the plaintiff executed trust and transferred amounts to the trustees for benefit of her grand-children. There was no consideration whatsoever for such transfer. Against said action of the assessee the instant suit was filed for a declaration that the deed of settlement was not binding upon the creditors including the plaintiff department. The assessee defendant no. 1, on the other hand raised a plea that at the time of execution of deed of trust, she had no creditors under such circumstances instant suit filed by the plaintiff was vexatious and it was liable to be dismissed. HELD The assessee did not give any evidence to indicate that she had other creditors. The question whether there are other creditors besides the plaintiff was a question of fact of a particular case and unless there was any proof that there were other creditors, the defence that the suit was liable to be dismissed inasmuch as no notice had been served and as such the suit could not be held for and on behalf of the body of the creditors, was untenable. In any event, in view of the provisions as contained in section 281 the plaintiff was entitled to claim the relief as prayed for. Under the circumstances, the settlement deeds were void and not binding on the department. Note: The case was decided against the assessee. CASES REFERRED TO Abdul Hakim v. Abdul Gani AIR 1925 Cal. 547, Bhaskara Chalamiah v. Body of Creditors of Piler Khasim Sahib AIR 1965 AP 68,Kumaravelu Chettiar v. T.P. Ramaswami Ayyar AIR 1933 PC 183, Dr. D.M. Lahiri…

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