LAURA HAMILTON Vs. MENON V K P TRO

JUDGEMENT

(1.) BY this petition under Art. 226 of the Constitution of India, the petitioner has challenged the demand made against her by the TRO by his notice dated August 24, 1983, under a guarantee given by her under S. 230(1) of the IT 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 abroad in the year 1966, she was required to obtain income tax clearance certificate under s. 230(1) of the IT Act. Perhaps, her assessments were not then complete or some taxes were outstanding and it was not possible for the ITO to issue a tax clearance certificate to her as such. In the circumstances, the petitioner gave a guarantee for her and on her behalf under S. 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 IT Act, EPT Act, Business Profits Tax Act, GT Act, WT 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 years thereafter, the petitioner received a notice under r. 88 of the Second Schedule to the IT Act, 1961, to the effect that a sum of Rs. 25,222 had fallen due from Lisbet Holmes in respect of asst. yrs. 1969 70 to 1972 73 and that the petitioner was liable to pay the same under the guarantee. By letter dated September 20, 1983, the petitioner's chartered accountants wrote to the TRO that the guarantee was for taxes that were outstanding or could be outstanding for the period up to the date of the assessee's departure from India to Canada in the year 1966. The petitioner was not liable to pay any taxes for the period thereafter. Accordingly, she was not liable to pay the taxes for the asst. yrs. 1969 70 to 1972 73. Hearing nothing from the TRO, the petitioner filed this petition.

(3.) THERE is no dispute that so far as the certificate as regards no liability is concerned, the liability has necessarily to be a liability outstanding on the date of the departure or at best 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.