Surplus sale proceeds from tax recovery sales must be transmitted to the civil court where the balance is already attached.

Rule 8 of the Tax Recovery Rules requires sale proceeds from attached property to be applied first to auction costs, then to the recovery certificate dues, then to any other recoverable statutory amount, with any balance payable to the defaulter. Where the surplus itself had already been attached by a civil court, the Tax Recovery Officer could satisfy the obligation to remit the balance by transmitting it to that court. The rival claims of mortgagees to the surplus and their priority over the mortgage debt were left undecided because those issues were already pending before the civil court.

---

---

Issues: Whether, after sale of the attached property in recovery proceedings, the Tax Recovery Officer was bound to deal with the surplus sale proceeds in accordance with Rule 8 of the Tax Recovery Rules under the Second Schedule to the Income-tax Act, 1961, and whether the surplus could be transmitted to the civil court where an attachment order had already been passed.

Analysis: Rule 8 requires the sale proceeds to be applied first towards auction costs, then towards the amount due under the recovery certificate, thereafter towards any other amount recoverable under the statutory procedure, and the balance, if any, to be paid to the defaulter. The dispute raised by the mortgagees regarding entitlement to the surplus and priority over the mortgage debt was not decided in the writ proceedings because those claims were already pending before the civil court. Since the surplus amount had itself been attached by the civil court, the Tax Recovery Officer could comply with the statutory obligation to refund the balance by transmitting it to that court.

Conclusion: The Tax Recovery Officer was required to transmit the surplus sale proceeds to the court that had passed the attachment order, and not to retain them or directly decide the inter se claims to the money.

---