TaxTMI 
TaxTMI 
2022 (6) TMI 351
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....he Applicant was adjudged as an insolvent by order dated 26.11.2002 in I.P.No.77 of 2002. Pursuant thereto, the Official Assignee took charge of the estate of the Applicant. Thereafter, the assets of the Applicant were identified. The present application primarily concerns an immovable asset which was sold by auction in the year 2011. Such sale took place pursuant to orders of this Court. Prior thereto, by letter dated 09.01.2007, the Applicant informed the Official Assignee that capital gains may accrue from the sale of the assets, and that capital gains tax should be paid in respect thereof. However, the Official Assignee did not take any steps in such regard. In those circumstances, the Applicant filed Application No.433 of 2009 to direct the Official Assignee to remit capital gains tax so as to avert interest and penalty liabilities in respect thereof. Application No.433 of 2009 was disposed of by this Court by directing the Official Assignee to set apart 20% of the insolvent's share of the sale proceeds from the sale of the relevant immovable asset towards capital gains tax. On the basis of the said order, 20% was initially parked in a Reserve Bank of India account and sub....
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....already made. We are fortified with a view taken by us by a decision of the Supreme Court in Johrilal vs. Bhanwari (AIR) 1977 SC 2202, which arose in terms of Section 4 of the Provincial Towns Insolvency Act, 1920, which is in pari materia with Section 7 of the Presidency Towns Insolvency Act. No costs. Consequently, the above M.Ps. are closed.'' 5. Oral submissions were made on behalf of the Applicant by Mr.T.R.Rajagopal, senior counsel, assisted by Mrs.P.Veena Suresh, learned counsel; on behalf of the Official Assignee by Mr.N.V.Balaji, learned counsel; and on behalf of the Income Tax Department by Mr.Karthik Ranganathan, learned standing counsel. 6. The Applicant contended that she is entitled to waiver of interest because her estate was under the control of the Official Assignee when the asset was brought to sale or when the tax liability accrued, as the case may be. Consequently, she was not in a position to remit income tax. Therefore, she informed the Official Assignee in January 2007 to remit capital gains tax arising out of the sale of immovable assets. Since the Official Assignee did not act on her request, she filed Application No.433 of 2009 for a direction to....
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.... account number (PAN) in respect of the estate of an insolvent. Consequently, it was contended that the Official Assignee cannot be held liable for payment of tax or interest thereon when it was not even feasible for the Official Assignee to obtain PAN until January 2019. 9. On the contrary, the Income Tax Department submitted that the income tax liability of the ex-insolvent relates to the assessment years 2008 - 2009 up to 2018 - 2019. In most years, the income tax liability arises out of interest income. However, as regards the assessment year 2011 - 2012, the income tax liability arises out of the sale of an immovable asset. The I-T Act provides for interest liability at the rate of 1% per month or 12% per year for delayed remittance of tax. On such basis, the aggregate liability of Rs.2,42,27,764/- was arrived at. 10. According to the Income Tax Department, the Official Assignee cannot contend that there is no income tax liability. Upon the assessment order being issued, income tax was remitted, albeit belatedly, by the Official Assignee. The relevant assessment orders were not challenged. Therefore, it was contended by the Income Tax Department that the scope of the present....
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....to 2013 - 2014, the principal tax liability was paid on 29.03.2016. As regards the assessment year 2014 - 2015, the principal tax liability was paid on 15.12.2016. As regards the assessment years 2015 - 2016 and 2016 - 2017, the principal tax liability was discharged on 21.12.2016. As regards the assessment years 2017 - 2018 and 2018 - 2019, the principal tax liability was discharged on 15.03.2018. The interest claim relates to the assessment years 2008 - 2009 to 2016 - 2017. The largest interest claim is for the assessment year 2011 - 2012, and such claim is for a sum of Rs.1,64,02,848/-. The aggregate interest claim is for a sum of Rs.2,42,27,764/-. 14. Much of the confusion arises out of the fact that the estate of an insolvent is ordinarily not subject to income tax because the monetary value of such estate is typically insufficient to meet the liabilities of the relevant insolvent. On perusal of the provisions of the I-T Act and, in particular, the definitions of assessee and representative assessee, as contained therein, the status of the Official Assignee is unclear to say the least because it is debatable as to whether the Official Assignee would qualify as an assessee. Th....
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.... its perspective. On this issue, it should be noticed, however, that the Income Tax Department calculated interest erroneously from the year 2008 although the sale proceeds were received only in 2011. To that extent, the computation and, consequently, the interest claim of the Income Tax Department is unreasonable. 17. Another significant aspect, which was adverted to earlier, is that there is considerable confusion with regard to the liability of the Official Assignee to pay income tax. In the case at hand, income tax was eventually paid under PAN CJLPB1177R, which appears to have been issued by the Income Tax Department in the name of the assessee in the year 2016. It is unclear as to why PAN ACUPB7532Q, which had been obtained by the ex-insolvent/Applicant on 06.05.1999, was not used for the above purpose. 18. From the foregoing discussion, the position that emerges is that the Income Tax Department has a reasonable basis to claim interest inasmuch as the sale proceeds were deposited into an interest bearing account. However, the claim is made at the rate of 12% per annum. Besides, the claim is made from the year 2008 onwards, which is clearly untenable. Given the fact that 20....