Clarification for compounding of offences of directors etc. in the context of TDS/TCS related prosecutions. - Income Tax - F. No. 285/35/2013-IT (Inv. V)/135

F. No. 285/35/2013-IT (Inv. V)/135 Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) E-2, ARA Centre, Jhandewalan Extn. New Delhi. Dated : 24th, February, 2015 To, All PCCsIT/CCsIT/PDGsIT/DGsIT Madam/Sir, Sub : Clarification for compounding of offences of directors etc. in the context of TDS/TCS related prosecutions. I am directed to refer to the Guidelines for compounding of offences issued by the Board vide F. No. 285/35/2013 IT (Inv. V) dated 23.12.2014 Doubts have been expressed by the filed formations in the context of TDS related prosecutions that in cases where a Company/Firm/AOP/BOI is the main accused and its directors, partners are co-accused, whether the compounding fee has to be paid only by the defaulter Company/Firm/AOP/ BOI or in addition to the payment of compounding fees by such entities, the directors/ partners also have to pay compounding fees at the rates prescribed in the guidelines dated 23.12.2014, individually for the same default. 2. In this regard, the undersigned is directed to convey the following: (i) Section 278B of the Act provides that where an offence under the Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. (ii) Sub Section (2) lays down that where it is proved that the offence was committed with the consent convenience of, or it attributable to any neglect of any director, manager, secretary or other officer, such person also be deemed to be guilty of the offence and shall be proceeded against and punished. (iii) Sub Section (3) lays down that where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, without prejudice to the provisions contained in sub section (1) or sub section (2), such company shall be punished with fine and every person, referred to in sub section (1), or the director, manager, secretary or other officers of the company referred to in sub section (2), shall be liable to be proceeded against and punished in accordance with the provisions of this Act. (iv) The company for the purpose of section 278B includes a Firm/AOP/BOI and director includes partners of a firm and members of AOP/BOI. 3. It is thought that all the director of the company and persons associated with it are not to be prosecuted for the offence committed by the company. Only those directors/persons, who were in charge of, and responsible to the company for the conduct of the business or to whom the consent/connivance/neglect etc mentioned in section 278B could be attributed, are to be proceeded against. In the light of these provisions, in the case of a company prosecution is initiated against the specific persons for specific defaults as per relevant provisions of the Act, the compounding application is to be filed separately by the company and each of the directors against whom the prosecution proceedings have been initiated, in case they desire for compounding. 4. In this regard, attention is invited to paragraphs 12.8 to 12.9 of the Board s Guidelines of even number dated 23.12.2014. The said paragraphs, inter alia, provide for charging of compounding fee at the rate of 10% of the compounding fee for the main offence from each of persons charged u/s 278B or 278C. On the same analogy, in the case of compounding applications of Directors of a company for TDS/TCS related offences, compounding fee at the rate of 10% of the compounding fee determined in the case of the company for compounding of the TDS/TCS related offence may be charged from each of the directors seeking compounding. 5. It is further clarified that in such cases, compounding applications of directors shall be considered only if the company itself has applied for compounding and its case has been found fit for compounding. 6. These clarifications may be read as part of the Board s guidelines for compounding of offences dated 23.12.2014. 7. The Pr.CCsIT/CCsIT/Pr.DGsIT/DGsIT are requested to circulate the above clarifications among all the officers of their region for compliance. Yours faithfully, (Rajat Mittal) Under Secretary (Inv. V), CBDT