https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=759946 https://www.taxtmi.com/caselaws?id=759946 Recovery proceedings - attachment orders u/s 226(3) of Cash Credit Accounts - whether the accounts which are in the nature of Cash Credit Accounts can be attached and that there was any money due to the petitioner from the bank which can be recovered in terms of sub section (3) of Section 226 of the Act? HELD THAT:- Proceedings u/ss (3) of Section 226 of the Act are in the nature of what is commonly called garnishee proceedings. Attachment of debts is a process by means of which judgment creditor is enabled to reach the money due to a judgment debtor which is in the hands of a third person. These are garnishee proceedings. To be capable of attachment, there must be in existence at the time when the attachment becomes operative, sometime which the law recognizes debt . So long as there is debt in existence, it is not necessary that it should be immediately payable. Where any existing debt is payable by future installments, the garnishee order may be made to become operative as and when installment becomes due. The debt must be one which the judgment debtor could himself enforce for his own benefit. The debt is a sum of money which is now payable or will become payable in future by reason of present obligation. In case titled K.M. Adam vs. The Income Tax Officer [ 1957 (10) TMI 32 - MADRAS HIGH COURT] Madras High Court while dealing with a provisions under Income Tax Act, 1922 was dealing with a case where the bank had afforded the overdraft facility to its customers. The question arose whether the bank account a holds the amount, specified as that up to which the customer may draw is either a debtor of the customer or holds that money on behalf of or on account of the customer. As decided in Kaneria Granitio Ltd. [ 2016 (7) TMI 65 - GUJARAT HIGH COURT] it was held that unless there exists a relationship of debtor and creditor the order of attachment by an authority under the provisions contained u/s 226 (3) cannot be passed. It was further held that the Cash Credit limit is a facility provided by the bank to its customers to use and utilize the money; and if such facility availed of, it would attract the interest to be charged for the same so utilized. Accordingly, the question, as framed above, is answered that mere providing a facility of an overdraft, it cannot be said that the bank is a debtor to its customers or holds the money for account of its customers, nor any point of time at which it holds any money of his on his account. The Cash Credit limit is a facility provided by the bank to its customers to use and utilize the money and if such facility availed of, it would attract the interest to be charged for the same so utilized and, therefore, the amount cannot be attached in terms of sub Section (3) of Section 226 of the Act. This Court does not find that the action on the part of respondent No. 1 in passing the order of attachment of Cash Credit Account would at all be sustainable, in view of the ratio laid down in the above noted judgments; even the meaningful reading of the language employed in Section 226 (3) does not suggest that the account like the Cash Credit or the overdraft is capable of being attached as the bank does not become a debtor. This Court, therefore, finds that the impugned orders of attachment passed by the authorities are clearly beyond the powers conferred under Section 226 (3) of the Act and, therefore, are liable to be quashed and set aside. Petition allowed. Case-Laws Income Tax Mon, 30 Sep 2024 00:00:00 +0530