Tax Liability Cannot Be Shifted to an Entity That Was Shown as a Vendor in Registered Sales Deed | HC

Case Details: Sushant Agarwal (HUF) vs. Anmol Agarwal & Ors. - [2024] 165 taxmann.com 431 (Calcutta)

Judiciary and Counsel Details

• Apurba Sinha Ray, J.
• Jitendra Patnaik, Nirmalya Dasgupta & Ms Dikcha Jajodia, Advs. for the Petitioner.
• Partha Ganguly, Atreya Chakraborty & Ms Nandini Sharma, Advs. for the Respondent.

Facts of the Case

The assessee, a Hindu Undivided Family (HUF), initiated execution proceedings to implement a consent decree passed in connection with a suit. During the hearing, the counsel of the judgment-debtor undertook before the Court that his client would comply with all the requisite obligations under the consent decree and further undertook that his client would file an affidavit stating that the tax responsibility of the relevant transaction shall be upon the judgment-debtor.

Subsequently, the judgment-debtor refused to submit such an undertaking. The decree-holder filed an application before the Court praying for direction upon the judgment-debtors to give an undertaking that any tax liability arises out of the sale and/or transfer of the office space shall be the liability and responsibility of the judgment-debtors and not of the assessee or of the decree holders.

High Court Held

The Calcutta High Court held that the executing Court could not direct a person other than the vendor of a registered deed to shoulder the tax responsibility in connection with a transaction where the sale value of the property is lesser than the value adopted or assessed by the Authority for the purpose of payment of stamp duty in respect of such transfer.

In the instant case, as per the consent decree, the assessee, along with other defendants, was to execute a transfer deed in respect of the office space in favour of the judgment-debtor. As the name of the company has been shown as the vendor and as the relevant provisions of the Income-tax Act direct the vendor to shoulder the tax responsibility, the Court cannot direct the then director or the vendee to shoulder the tax responsibility personally.

Further, the undertaking given by the concerned lawyer shows that it was given against the provisions of law. Even if such an undertaking is not respected, the Court cannot direct the concerned party to shoulder the tax responsibility since if it does so, it would go against the provisions of the Income-tax Act, 1961, and also against the intention of the Legislature.

List of Cases Referred to

• Barkat Ali & Anr. v. Badrinarain AIR 2009 Cal 24 (para 5)
• 2023 SCC Online SC 1395 (Pradeep Mehra v. Harijivan J. Jethwa (Since Deceased Thr. Lrs.) (para 5).