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Section 179 Amended to Align with Provisions and to Covers Fees

section-179-amended-to-align-with-provisions-and-to-covers-fees

Finance Bill, 2022 proposes to amend the marginal heading of section 179 of the Income-tax Act, 1961 (‘Act’) to omit the words ‘in liquidation’ to align with the provisions of the section which does not only deal with private companies under liquidation but cover all private companies, whether in liquidation or not.


Further, the word “fees” is added to the scope of the expression “tax due” in the Explanation to the said section.


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.



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”. 


Further, the 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.


For this purpose, Clause 55 of the Finance Bill, 2022 proposes to amend section 179 of the Act as below-


Amendment of section 179.


55. 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. 


Explaining the proposed amendment to section 179


Clause 55 seeks to amend section 179 of the Act relating to liability of directors of private company in liquidation. It provides for the 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 a 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 and shall apply from the assessment year 2022-23.


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Section 179 Amended to Align with Provisions and to Covers Fees



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