712/CBDT. - Income Tax - 712/CBDT

INSTRUCTION NO. 712/CBDT Dated : July 4, 1974 Section(s) Referred: 230A Statute: Income - Tax Act, 1961 A case has been brought to the notice of the Board wherein the Income-tax Officer before issuing a certificate u/s 230A of the Income-tax Act 1961 insisted upon payment of a certain amount in advance towards the capital gains liability which may accrue on the proposed sale or transfer. 2. The scope of the words 'existing liability' occurring in Section 230A of the Income-tax Act, 1961 has been explained in the Board's Instruction No. 481 dated 25th November, 1972. It has been clarified in this instruction that the expression 'existing liability' occurring in clause (a) of sub-section (1) of section 230A would include not only a tax liability which has been ascertained and is payable upon an assessment order but also a tax liability which accrues under the chargeable section, although in the latter case the tax liability may be quantified later by a regular assessment order. Thus if the wealth-tax proceedings are pending against the vender of the property at the time the Income-tax Officer issues the certificate, it is open to the later to take into account the estimated tax liability on account of wealth-tax. It is now further clarified that words "existing liability" would not cover liability to capital gains which may arise on proposed transfer of assets. Liability to capital gains arising out of the proposed transfer of the immovable property cannot be said to be an 'existing liability' within the meaning of Section 230A even as per the Board's Instruction's No. 481 referred to above. The Income-tax Officer, therefore, cannot take into account the capital gains which may accrue as a result of the proposed transfer before giving the certificate u/s 230A. These instructions may be brought to the notice of all officers working in the charge.