Law:

Section:

Rule 16, read with rule 51, of the Second Schedule to the Income-tax Act, 1961 - Recovery of tax - Private alienation to be void in certain cases - Appellant filed a civil suit against defendant for recovery of certain amount of money advanced -He obtained a decree in that suit and obtained an order of attachment - Notice under rule 2 of Second Schedule had already been served on defendant by department for recovery of tax arrears even before above suit was filed by appellant -Whether department could claim payment of amount standing to credit of aforesaid civil suit on a priority basis - Held, yes Facts The appellant had advanced a certain sum to the first defendant and the second and third defendants were the sureties. A civil suit was filed in 1977 by the appellant for a decree against the three defendants for the recovery of the impugned amount with interest from the date of the plaint. The suit was decreed and in its execution, the appellant attached the right, title and interest of the defendants in a motion picture. That picture was produced by a firm of producers called V. The partners of V were the same as that of firm R, the second defendant in the present suit. V and R were also in arrears of tax. On a certificate being received from the department, the TRO had already issued a notice to both V and R under rule 2 of the Second Schedule. The department claimed payment of the entire money towards the decree in the civil suit of 1977 on a priority basis on the ground that the tax arrears were a Government debt. Accordingly, the ITO attached the monies standing to the credit of the 1977 suit in favour of the department. The appellant filed an application for declaration that the said attachment made by the ITO was invalid and not binding on him. A Single Judge of the High Court held that the rule 2 notice was served on the defaulter even before the suit was filed by the appellant and, therefore, the claim of the department could not be resisted. On appeal: Held In view of rules 16 and 51 of the Second Schedule, the decree in the 1977 suit itself could not be executed against the said motion picture or against the monies realised towards the decreed…

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