The Gujarat High Court has reserved it’s judgment on the issue whether Income Tax Department has first charge over a secured property or not. The issue pertains to the Income Tax (IT) authorities’ challenge to provisions of section 13 of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act against provisions of Section 281 of Income Tax Act.
The court comprising Chief Justice SJ Mukhopadhaya and Justice JB Pardiwala reserved the order after hearing the case of Tax recovery officer vs Industrial Finance Corporation of India (IFCI) and another.
The tax department challenged the IFCI’s actions of taking over the possession of properties of one Parekh Platinum Limited.
As per the IT department’s case, the assessment was framed for the assessment year 1996-97 as a result of which, Rs 242 crores plus interest, penalty and other charges were due to be recovered from Parekh Platinum Limited which is based in Gandhinagar district.
In December 2004, the authorities passed attachment order against the properties of PPL. This development was brought to the notice of IFCI. The tax department claimed that despite bringing it to IFCI’s notice, it took possession of the properties which were attached. It further claimed that PPL sold one of it’s properties which was attached by the authorities.
The tax recovery officer in the petition claimed that as per section 281 of Income Tax Act, the charge created by PPL in favour of IFCI is required to be declared void as against the claim of IT department.
They further claimed, “Serious and irreparable prejudiced would be caused if IFCI goes on with the auction of the properties.”
The court had earlier noted that the question whether Income Tax Department has first charge over the property in question, cannot be determined by the Debt Recovery Tribunal as it only has power to decide whether measures taken under the provisions of Securitization Act were in accordance with the Act or not. The court had later admitted the appeal.
Courtesy: law et all