Section 178(1) — the law in short
What the courts have decided on section 178(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.178: the liquidator's thirty-day notice, the amount he must set aside, and his personal liability for the company's tax if he does not — and the Insolvency and Bankruptcy Code carve-out in s.178(6) from 1 November 2016
CBDT Circulars & InstructionsCuts both ways
I have just been appointed liquidator of a company. What do I have to tell the income-tax department, by when, and what happens to me personally if I distribute the assets before I hear back?
You are personally liable. Section 178(4) provides in terms that if the liquidator fails to give the notice required by sub-section (1), or fails to set aside the amount required by sub-section (3), or parts with any of the assets of the company or the properties in his hands in contravention of sub-section (3), 'he shall be personally liable for the payment of the tax which the company would be liable to pay', capped by the proviso at the amount notified under sub-section (2) if an amount has been notified. The two duties that trigger it are short and dated: within thirty days after becoming liquidator you must give notice of your appointment to the Assessing Officer entitled to assess the company's income (sub-section (1)); and once the Assessing Officer notifies you of the amount he considers sufficient to provide for the company's tax — which he must do within three months of receiving your notice (sub-section (2)) — you must set that amount aside, and until you do you must not part with any of the assets (sub-section (3)(b)). Before you are notified, you must not part with any assets at all without the leave of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner (sub-section (3)(a)).
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.