Amendment in the provisions of section 179 of the Act

Section 179 of the Act contains provisions which enables Income tax authorities to recover tax due from a private company from its directors, under certain circumstances where such tax cannot be recovered from the company itself. The section makes each director of the private company jointly and severally liable for the payment of such tax with certain conditions. However, the title of the section inadvertently refers to the liability of directors of private company in liquidation.

2. The liability of directors of a private company under this section is not conditional upon the company being in liquidation and the section makes no reference to liquidation. Therefore, to make the title of the section uniform with its provisions, it is proposed to amend the title of the section to “Liability of directors of private company”.

3. Further, Explanation to the section clarifies that the expression “tax due” in the section includes penalty, interest of any other sum payable under the Act. In order to avoid unnecessary litigation and to provide further clarity, it is also proposed to insert the word “fees” in the scope of the expression “tax due” under Explanation to the section.

4. This amendment will take effect from 1st April, 2022.

[Clause 55]

 

Liability of directors of private company clarified as joint responsibility for tax, fees, interest and penalties if company recovery fails. Amendment renames the section title to Liability of directors of private company to reflect that directors are jointly and severally liable where tax cannot be recovered from the company, clarifies that this liability is not conditional on liquidation, and expands the Explanation so that the expression 'tax due' expressly includes fees alongside penalty, interest and other sums payable.