The Central Board of Direct Taxes ( CBDT ) has clarified that the Official Assignee, who realizes property of the insolvent and allocated it amongst the creditors of the insolvent, is required to file Income tax return in the Income Tax Return form applicable to ‘artificial juridical person’ separately of each of the estate of the insolvent.
The Board further clarified that Official Assignees would have to obtain a separate PAN for each of the estates of the insolvent.
As per provisions of section 160(1)(iii) of the Act, a ‘Representative Assessee’ amongst other situations specified therein, becomes liable in respect of any income which the Assignee receives or is entitled to receive while managing the property for benefit of any person. As per the two insolvency Acts, Official Assignee manages the property of the debtor for the benefit of the creditors. Further, the Insolvency Act, 1909, in unambiguous terms, provides that an insolvent ceases to have an ownership interest in the estate once an order of adjudication is made under section 17 of the Insolvency Act.
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In the circular, the Board clarified that since Official Assignee does not receive the income or manage the property on behalf of the debtor, they cannot be considered as a ‘Representative Assessee’ of the debtor under the Act while computing the tax liability arising from the estate of the debtor.
“As property of the insolvent is vested with the Official Assignee as per specific provisions of the Act/ Law regulating the functioning of the Official Assignee’s, they have to be treated as a ‘juristic entity’ for purposes of the Income-tax Act. Hence, it is clarified that for purpose of discharge of tax-liability under the Act, the status of Official Assignees is that of an ‘artificial juridical person’ as prescribed in section 2(31 )(vii) of the Act, not being one of the ‘persons’ falling in sub-clauses (i) to (vi) of section 2(31) of the Act,” it said.
“Therefore, Official Assignee is required to file the income-tax return electronically in the ITR Form applicable to ‘artificial juridical person’ separately for each of the estates of the insolvent and the income shall be taxed as per the rates applicable in a particular year to an ‘artificial juridical person’,” it added.
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