Finance Bill, 2022 proposes Amendment to Provision relating to Tax Liability of Directors of Private Companies [Read Finance Bill]

The Finance Bill, 2022 has proposed to amend the provisions of section 179 of the Income Tax Act, 1961 relating to tax liability of directors of the private limited companies applicable from 1^st April 2022.

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, 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, the proposed amendment would include the word “fees” in the scope of the expression “tax due” under Explanation to the section.

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