Clarification regarding liability and status of Official Assignees under the Income tax Act
Circular No. 4/2019 was issued by the Central Board of Direct Taxes on 28 January 2019. Its subject is Clarification regarding liability and status of Official Assignees under the Income tax Act.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Settles how an Official Assignee is assessed. Where a court passes an order of insolvency under the Presidency Towns Insolvency Act, 1909 or the Provincial Insolvency Act, 1920, the debtor's property vests in the Official Assignee, who realises it and distributes it among the creditors. The Board clarifies that the Official Assignee is not a representative assessee of the debtor under clause (iii) of sub-section (1) of section 160, because he neither receives the income nor manages the property on behalf of the debtor - under the 1909 Act the insolvent ceases to have any ownership interest in the estate once an order of adjudication is made under section 17 of that Act. The Official Assignee's own status is that of an artificial juridical person under sub-clause (vii) of section 2(31), not falling within sub-clauses (i) to (vi). He must therefore file a return electronically in the form applicable to an artificial juridical person separately for each estate, at the rates applicable to that status, and obtain a separate PAN for each estate.
A clarification had been sought on whether clause (iii) of sub-section (1) of section 160 applies to an Official Assignee and on which category of 'person' in section 2(31) he falls in.
/ . Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 91/2019 North Block, New Delhi, the 26 of January, 2019 Subject: Clarification regarding liability and status of Official Assignees under the Income-tax Act-reg.- Under provisions of the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, where an order of Insolvency is passed against a debtor by the concerned Court, property of the debtor gets vested with the Court appointed Official Assignee. The Official Assignee then realizes property of the insolvent and allocates it amongst the creditors of the insolvent. Consequentially, Official Assignee has the responsibility to handle income-tax matters of the estate assigned to him. In this regard, a clarification has been sought regarding applicability of clause (iii) of section 160(1) of the Income-tax Act, 1961 (Act) which applies on a 'Representative Assessee' in the case of an Official Assignee. Further, clarity regarding status of the Official Assignee's i.e. their fallibility in the appropriate category of 'persons', as defined in section 2(31) of the Act, has also been sought. 2. As per provisions of section 160(1)(iii) of the Act, a 'Representative Assessee' amongst other situations specified therein, becomes liable in respect of any income which the Assignee receives or is entitled to receive while managing the property for benefit of any person. As per the two insolvency Acts, Official Assignee manages the property of the debtor for the benefit of the creditors. Further, the Insolvency Act, 1909, in unambiguous terms, provides that an insolvent ceases to have an ownership interest in the estate once an order of adjudication is made under section 17 of the Insolvency Act. Thus, it is hereby clarified that since Official Assignee does not receive the income or manage the property on behalf of the debtor, they cannot be considered as a 'Representative Assessee' of the debtor under the Act while computing the tax-liability arising from the estate of the debtor. 3. As property of the insolvent is vested with the Official Assignee as per specific provisions of the Act/Law regulating functioning of the Official Assignee's, they have to be treated as a 'juristic entity' for purposes of the income-tax Act. Hence, it is clarified that for purpose of discharge of tax-liability under the Act, the status of Official Assignees is that of an 'artificial juridical person' as prescribed in section 2(31)(vii) of the Act, not being one of the 'persons' falling in sub-clauses (i) to (vi) of section 2(31) of the Act. 4. Therefore, Official Assignee is required to file income-tax return electronically in the ITR Form applicable to 'artificial juridical person' separately for each of the estate of the insolvent and the income shall be taxed as per the rates applicable in a particular year to an 'artificial juridical person'. 5. In view of the above position, Official Assignees would have to obtain a separate PAN for each of the estate of the insolvent. 6. Hindi version to follow. (F.No. 225/427/2018/ITA.II) Copy to:- PS to FM/OSD to FM/PS to MoS(F)/OSD to MoS(F) ii. PS to Secretary (Revenue) iii. Chairman, CBOT & All Members, CBOT iv. All Pr.Os GIT / Pr.CCs IT v. All Joint Secretaries/CsIT, CBOT vi. CIT (M&TP), Official Spokesperson of CBOT vii. % Pro OGIT (Systems) for uploading on official website viii. Addl. CIT (Database Cell) for uploading on departmental website -sd- (Rajarajeswari R.) Under Secretary (ITA.II), CBOT Under Secretary (ITA.II), CBOT
On registration and return filing for an insolvent's estate, or where an Assessing Officer proposes to assess the Official Assignee as a representative assessee of the debtor under section 160.
It mentions. Circular No. 91/2019
Source: the Income Tax Department’s own published text — its page for this instrument.
