IT : The expression "tax due" used in section 179 means tax as defined in section 2(43); "tax due" will not comprehend within its ambit penalty and interest

 

FACTS

• In the instant case, the petitioner was an individual and the only surviving director of a company after the expiry of other director who was his father.

• The petitioner was entitled to two refunds of Rs. 38,92,957 and another Rs. 15,00,276 but the revenue under section 179, proposed to set off the company's tax liability of Rs. 28,71,84,883 with the refund payable to the petitioner.

• In the context of recovery, the petitioner filed a writ petition and the Delhi High Court ordered

that the petitioner will be given a hearing and fresh order under section 179 required to be passed.

• Acting on the order of the High Court, the revenue held the petitioner as the assessee in default liable for the company's outstanding dues of Rs. 27,93,05,184.

• The Petitioner filed for rectification/amendment against which the revenue enhanced the outstanding dues of the company, and consequently, of the petitioner to Rs. 35,13,35,804. The increase was due to charging of interest and penalty.

• The petitioner contended that the company's outstanding dues were in the form of interest and penalties whereas "tax due" under section 179 does not include within its ambit interest and penalty. It was submitted that the language of the provision is clear and has to be construed in its terms.

• The revenue, however, urged that section 179 intends to shift the tax liability, in cases of such dues which are of a private company and have not been recovered, upon the directors of such private company; and that whatever is recoverable from the private company, inclusive of interest and penalties due, becomes recoverable at the hands of the directors.

HELD

• In the instant case, the principal question requiring resolution is to understand the true ambit and scope of the provisions of section 179.

• Generally, the intention of the Legislature should primarily be gathered from the language used in the statute, which in turn means that attention should be paid to what has been said as also to what has not been said.

• Again, when in relation to the same subject matter, different expressions are used in the same statute, there exists a presumption that the legislature intended such different uses, and that the words are not to be used in the same sense.

• In H. Ebrahim v. The DCIT and The Tax Recovery Officer [2011] 332 ITR 122, the Karnataka High Court held that 'what is contemplated under section 179 is the tax component and not the penalty and interest'.

• In Dinesh T. Tailor v. Tax Recovery Officer [2010] 326 ITR 85, the Bombay High Court held that in section 179(1), the expression "tax due" and, for that matter the expression "such tax" must mean tax as defined for the purposes of the Act by section 2(43); "tax due" will not comprehend within its ambit a penalty.

• In view of the above, it was opined that the structure and construct of the Act has consciously used different words to create constructive liability on third parties. The treatment of the same subject matter by using different terms – in some instances expansive and in others, restrictive - means that the Court has to adopt a circumspect approach and limit itself to the words used in the given case (in the present case, "tax due" under section 179) and not "travel outside them on a voyage of discovery".

• Thus, it was to be held that the petitioner cannot be made liable for anything more than the tax as defined in section 2 (43). The revenue was consequently directed to determine the liability of the petitioner, in the light of the finding. - [2012] 26 taxmann.com 203 (Delhi)