Transferee liability on business transfer is limited to unpaid tax existing at the date of transfer, not later assessments.
On a transfer of the whole business, the transferee's liability under section 15(1) of the Mysore Sales Tax Act, 1957 extends only to tax or penalty already payable and unpaid at the date of transfer. Tax or penalty assessed only after the transfer for earlier assessment years does not satisfy that condition, so liability cannot be fastened on the transferee. A separate recovery application under section 13(3) is also unavailable, because that provision contemplates tax assessed against the person proceeded against or amounts due from the dealer himself. The revision petitions succeeded and the recovery applications were dismissed.
Issues: (i) whether, on a transfer of the whole business, the transferee becomes liable under section 15(1) of the Mysore Sales Tax Act, 1957 for tax and penalty assessed only after the transfer in respect of earlier assessment years; (ii) whether such liability can be recovered from the transferee by an application to a Magistrate under section 13(3) of the Mysore Sales Tax Act, 1957.
Issue (i): whether, on a transfer of the whole business, the transferee becomes liable under section 15(1) of the Mysore Sales Tax Act, 1957 for tax and penalty assessed only after the transfer in respect of earlier assessment years.
Analysis: Liability under section 15(1) arises only if, at the time of transfer, there is already unpaid tax or penalty payable by the transferor. The provision transmits to the transferee only the amount remaining unpaid at the date of transfer. Where the assessment itself is made after the transfer, no tax or penalty had become payable at the time of transfer, and the statutory condition for fastening liability on the transferee is absent.
Conclusion: The transferee is not liable for tax or penalty assessed only after the transfer in respect of those assessment years; the conclusion is in favour of the assessee.
Issue (ii): whether such liability can be recovered from the transferee by an application to a Magistrate under section 13(3) of the Mysore Sales Tax Act, 1957.
Analysis: The expression "tax assessed" in section 13(3) refers to tax assessed in proceedings to which the person proceeded against was a party. The expression "any other amount due under the Act from a dealer" also contemplates recovery from the dealer himself. A liability that reaches the transferee only by reason of section 15(1) is not, in this sense, a tax assessed against the transferee nor an amount due from him as a dealer. Accordingly, section 13(3) does not authorise recovery from the transferee through the Magistrate.
Conclusion: Recovery from the transferee under section 13(3) is not maintainable; the conclusion is in favour of the assessee.
Final Conclusion: The revision petitions succeeded, the Magistrate's orders were set aside, and the recovery applications were dismissed because the transferee was not liable for the later-assessed tax and penalty, nor recoverable under the cited recovery provision.
Ratio Decidendi: A transferee's liability under a business-transfer tax provision extends only to tax or penalty already payable and unpaid at the time of transfer, and a general recovery provision for tax assessed or amounts due from a dealer does not, without clear words, authorise recovery from such transferee.
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AI Drafter ✕
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