ADMINISTRATOR, UNIT TRUST OF INDIA v. B.M.MALANI [(2007) 164 TAXMAN 463(SC)] S.B.Sinha & Harjit Singh Bedi, JJ. [Decided on 11.10.2007]
Income Tax Act 1961 – Section 226 – Collection and recovery of tax due – Respondent Assessee had invested in Unit scheme with the appellant – Assessee owed certain tax due – Department realized the tax due from this investment by directing the Appellant to pay to it from the account of the assessee – Whether correct- Held, No.
Brief Facts : The assessee had invested an amount of Rs.65 lakhs in units of monthly income plan (III) offered by the appellant- Unit Trust of India under capital gain scheme. Said plan was a five year close ended income plan and face value of a unit was Rs.10. Since certain sum was due from assessee on account of income-tax, Department issued a notice dated 8-2-2002 to the appellant under section 226(3) to pay the amount due. In compliance of the demand made, appellant paid certain amount to department wherefore value of unit at relevant time was calculated at the rate of Rs.6.93 per unit. The assessee filed a writ petition questioning the action of the appellant in resorting to sale of the said units without his consent. The High Court held that although the units were transferred, their value had not become due to the assessee on date on which such notice was given and, therefore, such transfer of units was to be quashed and assessee was entitled to redemption value of units at rate of Rs.10 unit after five years. Appellant appealed to the Supreme Court.
Decision : Appeal dismissed.
Reasons : Section 226(3) applicable only when money is due to the assessee from any person. The appellant was a statutory authority. It had floated the scheme. It knew the terms and conditions thereof. On a plain reading of the highlights of the scheme, it was evident that repurchase was allowed only from 1-9-2001 even without the consent of the assessee. It was for the assessee to give his option. The ITO could not have exercised the said option on behalf of the assessee. The assessee made all sincere efforts to pay the tax. It made an offer to the ITO to transfer the bonds at their face value at Rs.10 per unit. Unfortunately, the Department neither replied to the said letter nor paid heed to his request. The assessee had invested a sum of Rs.65 lakhs. He, therefore, was entitled to, least, that amount. Government of India had already been considering the matter of reimbursement to the holders of the units at least at the purchase rate. In that view of the matter, it must be held that it not only acted hastily but also illegally. Section 226(3)(iv) cannot be interpreted to mean that the Union Trust of India was fully authorized to dispose of the units on its own without any notice to the holder of the units. Having regard to section 226(3), it could not be said that the appellant was holding the money of the assessee in the instant case. The amount in question could have been held by the appellant only when the assessee had exercised his opinion. Therefore, there was no error in the judgment of the High Court as the assessee was entitled to be restituted. For the reasons aforementioned, the appeal is dismissed.
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