2018 (10) TMI 868 - HC - Income Tax

Court rules no tax demand for Respondent Trust; suggests seeking Competent Court directions for fund disbursement.

The court determined that no tax demand existed for Respondent No.2 Trust as there were no pending assessments. Since mandamus could not be sought ... Amounts in the hands of the Trusts as assessed to payment of taxes under the Income Tax Act, 1961 - Held that:- Once the two affidavits are taken on record and they categorically say that there are no assessments pending insofar as Respondent Nos.2,3 and 4 are concerned, no writ be issued. The Petitioners have their remedies and they can approach the Competent Court / Forum and seek directions to the Official Liquidator with regard to disbursement of the amounts. They can make this application after the Official Liquidator spells out his stand on oath before us. Surely the writ Petitioners cannot seek a mandamus insofar as these three Trusts are concerned. They are not holding any amounts much less public funds in that sense. All the more, therefore, we are not inclined to keep this Petition pending. It is disposed off in the light of the stand taken by the Income Tax Department (Respondent Nos. 1 and 5). As far as the reliefs against Respondent Nos.2,3 and 4 are concerned, in terms of the statements made on oath by the Official Liquidator, liberty is reserved to the Petitioners to adopt appropriate proceedings and before Competent Forum / Court. Writ Petition is disposed off in the above terms. Issues:1. Assessment of tax liability of Trusts related to a company in liquidation.2. Disbursement of funds held by Trusts claimed to belong to the employees of the company.3. Jurisdiction of the Court to issue a writ for mandamus regarding tax assessments and disbursement.Analysis:1. The court noted that there were two affidavits filed by the Assessing Officers stating that there were no pending assessments concerning the Trusts in question. As a result, no tax demand existed for Respondent No.2 Trust. The Official Liquidator expressed concerns about the funds claimed to belong to the employees of the company, as the Trustees of the Trusts were Ex-Directors of the company. The court emphasized that the Petition did not seek disbursement but rather direction for the Income Tax Officer to clarify if the Trusts' amounts could be subject to tax under the Income Tax Act, 1961.2. Since the affidavits confirmed no pending assessments, the court decided not to issue a writ. The Petitioners were advised to seek directions from the Competent Court regarding the disbursement of funds after the Official Liquidator's stance was presented under oath. The court clarified that mandamus could not be sought concerning the Trusts as they did not hold public funds. The Petition was disposed of based on the Income Tax Department's stand, and the Petitioners were granted liberty to take appropriate actions against Respondent Nos. 2, 3, and 4 before the Competent Forum/Court.3. The final judgment disposed of the Writ Petition in the mentioned terms and instructed the Official Liquidator to provide copies of the filed affidavits and reports to the advocates of the Petitioners and Respondent Nos. 2, 3, and 4. The court's decision highlighted the importance of seeking appropriate legal remedies and forums for issues related to tax assessments and fund disbursement, emphasizing the need for clarity and proper legal procedures in such matters.