By K. B. Bhujle
Advocate
13. Rajesh T. Shah vs. TRO [2020]
425 ITR 443 (Bom) Date
of order: 13th March, 2020 A.Ys.: 1988-89 to 1990-91
Recovery
of tax – Section 179 – Attachment and sale of property – Properties settled on
trust for grandchildren by ‘S’ – Recovery proceedings against son of ‘S’ u/s
179 – Properties settled on trust cannot be attached
One ‘S’
during her lifetime settled a private family trust under a trust deed dated 10th
April, 1978 for the benefit of her grandchildren. By a deed of will dated 5th
March, 1985, ‘S’ bequeathed all her properties in favour of the trust. ‘S’
expired on 26th August, 1991. The petitioner ‘H’, who was one of the
trustees, in the year 1986 joined the assessee company as a Managing Director
and resigned from the company in the year 1993. In 1990, the Department carried
out a survey action in the case of the company. Orders of assessment were
passed for the A.Ys. 1988-89, 1989-90 and 1990-91. The liability of the M.D.
was quantified. For realisation of the liability, by separate attachment
orders, the Tax Recovery Officer attached three properties belonging to the
trust on the premise that the three properties belonged to the petitioner in
his individual capacity.
The Bombay
High Court allowed the writ petition filed by the petitioner and held as under:
‘i) The
properties belonged to the trust which was settled by will by ‘S’ before
initiation of recovery proceedings by the Revenue against the petitioner. The
properties did not belong to the petitioner in his individual capacity or his
legal heirs or representatives. The trust had been formed in the year 1978 and
the will of ‘S’ was made in 1985, much before initiation of recovery proceedings.
There was no question of the properties being diverted to the trust to evade
payment of due tax.
ii) That being the
position, we set aside and quash the attachment orders.’
