Affixing the seal of the company on the Form of guarantee to be furnished under section 230 of the Income-tax Act, 1961 - liability of employer for the tax liability of the employee after his return to India - Income Tax - 548/CBDT

INSTRUCTION NO. 548/CBDT Dated : May 15, 1973 Section(s) Referred: 230 Statute: Income - Tax Act, 1961 At the last meeting of the Central Direct Taxes Advisory Committee held on 25th January, 1973, it was suggested that the requirement of affixing the seal of the company on the Form of guarantee to be furnished under section 230 of the Income-tax Act, 1961 (which necessitates the holding of a meeting especially for issuance of such guarantees where the employee/director of the company has to proceed out of India on business at short notice) should be dispensed with and that the employer should not be made responsible for the tax liability of the employee after his return to India. The Committee was informed that the questions raised were under consideration. 2. The matter has since been examined in consultation with the Ministry of Law. While the difficulty pointed out in affixing the seal of the company when the employee/director of the company has to proceed outside India on business at short notice is prima facie genuine, it is necessary at the same time to ensure that the guarantee executed on behalf of a company by a particular person has legal force. The Board are advised that if the I.T.O. is satisfied with reference to the Articles of Association or power of attorney or any other suitable document, that the guarantee given by the company has been executed on its behalf by a person duly authorized in this regard, it should be possible for the Department to dispense with the requirement of a seal. It has been decided by the Board that in appropriate cases where the employee/director of the company has to proceed out of India on business at short notice, the Income-tax Officer may accept the guarantee, without the seal of the company, provided it has been executed by a person duly authorized in this behalf. 3. As regards the suggestion that the employer should not be made responsible for the tax liability of the employee after his return to India, it has to be noticed that the purpose of section 230 is to secure that the taxes are paid before the person concerned can leave India, or at least satisfactory arrangements are made for the payment of taxes on his behalf, in respect of income upto the date of departure. The form of guarantee has been devised to be used where a person does not clear his liabilities before his departure and desires to obtain the certificate on the footing that satisfactory arrangements have been made to meet the tax liability. The provision in section 230 has been made to guard against loss of revenue which may be occasioned due to the physical absence of the person from India. It may , however, not be advisable for the guarantee to cease to have effect as soon as the person returns to India. It has, therefore, been decided by the Board that the guarantee should be in operation till the party's return to India and for a period of three months thereafter, subject to the conditions that the individual remains in India for the said period of three months and the company gives prompt notice to the Income-tax Officer of the party's return to India. A revised Form of guarantee is printed below. The I.T.O.s. dealing with the cases of such individuals should be alert and ensure that no delay is allowed to take place in recovering the taxes from them after their return to India. 4. These instructions may please be brought to the notice of all Income-tax Officers in each Charge. The Board's instructions contained in letter F.No.80/12/69-IT(B) dated 31st March, 1969 (Instruction No.31/69) may be treated as modified to the extent indicated above.