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.
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Note on Clause 55 of Finance Bill 2022
Clause 55 seeks to amend the section 179 of the Income-tax Act relating to liability of directors of private company in liquidation. It provides for recovery of tax dues of a private company from its directors, in cases where such tax dues cannot be recovered from the company itself.
The marginal heading of the said section reads as liability of directors of private company in liquidation. However, the provisions of the section do not deal with companies in liquidation. Therefore, it is proposed to omit the words “in liquidation” from the marginal heading of the said section.
It is further proposed to include “fees” within the scope of the expression “tax due” in the Explanation to the said section.
These amendments will take effect from 1st April, 2022.
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Extract of Clause 55 of Finance Bill 2022
55. Amendment of section 179.
In section 179 of the Income-tax Act,––
(a) in the marginal heading, the words “in liquidation” shall be omitted;
(b) in the Explanation, after the word “interest”, the word “, fees” shall be inserted.
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