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January 2010

Company in liquidation : Director’s liability : S. 179 of Income-tax Act, 1961 : Liability of director u/s.179 is limited to tax and it does not extend to penalty and interest.

By K. B. Bhujle, Advocate
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Reported :

33. Company in liquidation : Director’s liability : S. 179 of Income-tax Act, 1961 : Liability of director u/s.179 is limited to tax and it does not extend to penalty and interest.

[H. Ebrahim v. Dy. CIT, 185 Taxman 11 (Kar.)]

Dealing with the scope of the director of a company u/s.179 of the Income-tax Act, 1961, the Karnataka High Court held in this case as under :

“The phrase ‘tax’ as contemplated u/s.179 does not include penalty and interest, insofar as the directors of the company are concerned. However, this interpretation of phrase ‘tax would not be’ is u/s.179 and does not encompass the company. Indeed the company was liable to pay all the three components, i.e., ‘tax’, ‘interest’ and ‘penalty’ and any other sum due or recoverable from it as contemplated u/s.222.”

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