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2014 (2) TMI 849 - HC - Income TaxAttachment and recovery of amount from PPF account u/s 226(6) of the Act Held that - Considering the benevolent provisions of the PPF Act, 1968 and taking harmonious construction of the relevant provisions of the PPF Act read with the provisions of the Civil Procedure Code and the provisions contained in the Income-tax Act, 1961 for recovery of the tax dues, it clearly emerges that as long as an amount remains invested in a PPF account of an individual, the same would be immune from attachment from recovery of the tax dues - The situation may change as and when such amount is withdrawn and paid over to the subscriber, which is not the situation in the present case - the clarification issued by the CBDT does not take into account the provisions of Rule 10 of the Second Schedule to the Income-tax Act, 1961 and the provisions of Section 60(1) of the Code of Civil Procedure - The said clarification is contrary to such statutory provisions thus, the action of revenue of attaching and withdrawing the sum of PPF account is set aside Decided in favour of Assessee.
Issues:
1. Whether the amount in the petitioner's Public Provident Fund account can be attached for recovery of tax dues. 2. Interpretation of Section 9 of the Public Provident Fund Act, 1968. 3. Application of Rule 10 of Schedule-II to the Income-tax Act, 1961. 4. Analysis of relevant case laws regarding attachment of Provident Fund accounts. 5. Consideration of harmonious construction of legal provisions for recovery of tax dues. Analysis: 1. The petitioner challenged the attachment and recovery of Rs. 9,05,000 from their Public Provident Fund (PPF) account by the respondent Tax Recovery Officer. The petitioner argued that the outstanding tax dues were only Rs. 5,06,142 and contested the attachment under Section 9 of the PPF Act, 1968. The respondent contended that the PPF amount could be attached for tax liabilities as per a CBDT circular. The Court examined the benevolent nature of the PPF Act, emphasizing long-term savings and social security, and ruled that the PPF amount is immune from attachment for tax recovery as long as it remains invested, citing relevant legal provisions and case laws. 2. Section 9 of the PPF Act, 1968 states that the amount in a subscriber's PPF account shall not be liable to attachment under any decree or court order for any debt or liability incurred by the subscriber. The Court analyzed the objectives of the PPF Act, emphasizing the protection provided to subscribers' funds against attachment. The Court highlighted the importance of encouraging long-term savings and the social security aspect of the PPF scheme in interpreting the protective nature of Section 9. 3. Rule 10 of Schedule-II to the Income-tax Act, 1961 exempts properties exempted from attachment under the Civil Procedure Code from attachment for tax recovery. The Court linked this rule with Section 9 of the PPF Act and clause (ka) of the proviso to Section 60(1) of the Civil Procedure Code, establishing that PPF funds are not liable for attachment for tax dues. The Court emphasized the comprehensive legal framework that safeguards PPF funds from attachment for tax recovery. 4. The Court referred to legal precedents like Union of India v. Radha Kissen Agarwalla and Union of India v. Jyoti Chit Fund and Finance to support its interpretation of the protective nature of Provident Fund accounts against attachment. These cases underscored the trustee role of the government in safeguarding Provident Fund deposits and the public policy considerations behind prohibiting their attachment. 5. By considering a harmonious construction of the relevant legal provisions, the Court concluded that the petitioner's PPF amount was immune from attachment for tax recovery. The Court found the CBDT clarification contrary to statutory provisions and quashed the respondent's action of attaching and withdrawing funds from the petitioner's PPF account. The Court held that until the PPF amount is withdrawn, it remains protected from attachment for tax dues, ensuring the security of the subscriber's long-term savings.
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