Recovery of tax: PPF account is immune from attachment and sale for recovery of Income-tax dues: Dineshchandra Bhailalbhai Gandhi vs. TRO:

The petitioner is an individual assessee. The Tax Recovery Officer issued a notice dated 25-02-2005 u/s. 226(3) attached the assessee’s PPF account and also recovered an amount of Rs. 9,05,000/- from the said account.

The Gujarat High Court allowed the writ petition filed by the assessee challenging the recovery of the said amount from the PPF account and held as under:

“i) Rule 10 of the Second Schedule to the Income- Tax Act, 1961 provides that All such property as is by the Code of Civil Procedure, 1908, exempt from attachment and sale in execution of a decree of a civil court shall be exempt from attachment and sale under this Schedule. Proviso to section 60(1) of Code of Civil Procedure contains list of properties which shall not be liable to attachment or sale which inter alia covers in Clause (ka) “(ka) all deposits and other sums in or derived from any fund to which the Public Provident Fund Act, 1968 (23 of 1968), for the time being applies, in so far as they are declared by the said Act as not to be liable to attachment.”

ii) Therefore, any amount lying in the PPF account of a subscriber is immune from attachment and sale for recovery of the Income-tax dues. As long as an amount remains invested in a PPF account of an individual, the same would be immune from attachment from recovery of the tax dues. The situation may change as and when such amount is withdrawn and paid over to the subscriber.

iii) CBDT circular dated 07-11-1990 clarifying that “Section 9 of the Public Provident Fund applies only to attachment under a decree/order of a Court of Law and not to attachment by the Income-tax Authorities is contrary to the above statutory provisions.”