Amendment proposed in the title/ provisions of section 179 of the Income Tax Act, to rectify/ resolve the ambiguity in the title of the Section, which restricts the scope of recovery by IT Authorities from directors of the companies, specifically to liquidation cases only, vide Clause 55 of the Finance Bill 2022 (budget 2022-23):
1. Section 179 of the Income Tax 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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