2007 (1) TMI 603 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of recovery of tax arrears from personal assets of a director of a private limited company.

The judgment by the High Court of Allahabad addressed the issue of recovery of tax arrears from the personal assets of a director of a private limited company. The petitioner, a director of M/s Bhagirathi Iron & Steel Private Limited, challenged a Circular issued by the Commissioner, Trade Tax, U.P. Lucknow dated 15.09.1998. The central question was whether the tax liabilities of the private limited company could be enforced against the personal assets of the director.

The Court referred to previous cases, including G.C. Mehrotra vs. Deputy Collector (Collection) Sales Tax and Bheekhu Ram Jain vs. State of U.P., where it was established that recovery cannot be made from the personal assets of directors. The Circular dated 15.09.1998 was quashed in a previous judgment dated 9.8.2000 in the case of Bheekhu Ram Jain vs. State of U.P. The Court reiterated the principle that tax arrears of a company should not be recovered from the personal assets of its directors.

In the final decision, the Court directed the respondents not to recover the tax arrears and outstanding dues of the company from the personal assets of the petitioner. However, the respondents were permitted to recover the arrears of trade tax due against the company from the assets or property of M/s Bhagirathi Iron & Steel Private Limited and from directors who possess the company's assets.