Bombay High Court
Laura Hamilton V. vs K.P. Menon, Tax Recovery Officer And ... on 19 March, 1990
Equivalent citations: [1990]184ITR252(BOM)
JUDGMENT T.D. Sugla, J.
1. By this petition under article 226 of the constitution of India, the petitioner has challenged the demand made against her by the tax recovery officer by his noticed dated August 24, 1983, under a guarantee given by her section 230(1) of the Income-Tax Act 1961, on April 26, 1966. It is pertinent to mention that one Lisbet Holmes, a Canadian citizen, was having some business activity in India. When she was going aboard in year 1966, she was required to obtain income-tax clearance certificate under section 230(1) of the Income-Tax Act. perhaps, her assessment were not then complete or some taxes were outstanding and it was not possible for the Income-Tax Officer to issue a tax clearance certificate to her and as such. In the circumstance, the petitioner gave a guarantee for her and on her behalf under section 230(1) of the Act on April 26, 1966 undertaking to pay all taxes which were or which may become payable by her irrespective of whether the liability was in respect of the Income-Tax Act, Excess Profit Tax Act, Business Profit Tax Act. Gift-Tax Act, Wealth-Tax Act and Expenditure Tax Act. A clearance was given to Lisbet Holmes and she then left India for Canada.
2. In 1983, i.e., about 17 year thereafter, the petitioner received a notice under rule 88 of second schedule of the Income-Tax Act, 1962, to the effect that a sum of Rs. 25,222 had fallen due from Lisbet Holmms in respect of assessment year 1969-70 to 1972-73 and that the petitioner was liable to pay the same under guarantee. By letter dated September 20, 1983, the petitioner's chartered accountant wrote to the tax recovery officer that the guarantee was for taxes that were outstanding or could be outstanding for the period up to date of the assessees departure from India to Canada in year 1966. The petitioner was not liable to pay any taxes for the period thereafter. Accordingly, she was nor liable to pay any taxes for the assessment year 1969-70 to 1972-73. Hearing nothing from the tax recovery officer, the petitioner filed this petition.
3. No affidavit-in-reply has been filed as yet though the petition was filed in the year 1983, and was admitted on December 6, 1983. It may perhaps be accepted for the present that the guarantee is in wide terms and may contemplate guarantee in respect of the tax liability of Lisbet Holmes even for the period after her departure. The question. However, is what is the scope of a guarantee under section 230(1) of the Income-tax Act, 1961. Section 230(1) requires certain persons leaving India for abroad to obtain a clearance certificate before their departure. That tax clearance certificate has to be a tax clearance certificate from his or her assessing Income-tax Officer to the effect that that person has no liabilities under the Income-tax Act, Excess Profits Tax Act, Business Profits Tax Act, Wealth-tax Act, Expenditure Tax Act and Gift-tax Act. In case. For some reason, it is not possible for that person to obtain such a certificate from the assessing Income-tax Officer, he or she can obtain a clearance certificate by making satisfactory arrangements to the satisfaction of the assessing Income-tax Officer in which case the assessing Income-tax Officer certifies that that person has made satisfactory arrangements for the payment of or any of such taxes which are or may become payable by that person.
4. There is no dispute that so far as the certificate as regards no liability is concerned. The liability has necessarily to be a liability with reference to the date of the departure. While, according to the petitioner, the satisfactory arrangement must necessarily be also with regard to the same period, according to Dr. Balasubramanian, learned counsel for the Department. It is not so. It is stated that when the question of satisfactory arrangements comes in, the satisfactory arrangements ought to be not only with regard to the liability with reference to the date of the departure but to the liability for all times to come, i.e., the liability that may even occur 20 years after the departure.
5. In my judgement, the submission made on behalf of the Revenue is without any merit. When there is no dispute that the tax clearance certificate under section 230(1) is required with regard to the taxes outstanding as on the date of the departure or at the most the tax that may be outstanding with reference to the date of the departure, I fail to understand how satisfactory arrangements can go beyond or a guarantee may be required beyond that period. In this view of the matter. Whether the guarantee is in wide terms or in narrow terms is not germane to the issue. After all the guarantee was given for the purpose of obtaining the tax clearance certificate under section 230(1) and its scope cannot go beyond the requirement of the section.
6. In the result, the petition succeeds. Rule is made absolute in terms of prayers (a) and (b). No order as to costs.