Overdraft facility can not be attached by tax authorities

https://www.lawweb.in/2012/05/overdraft-facility-can-not-be-attached.html

overdraft facility can not be attached by tax authorities

The un-utilised overdraft account does not render the banker the debtor in any sense and the banker is, therefore, not a person from whom money is due to the customer. Nor is the banker in such case, a person from whom money may become due. Where the banker lends money on an overdraft and the customer is always in debit there is no stage at which the banker is debtor to the customer, nor at any point of time at which he holds any money of the customer or the later's account. overdraft facility can not be atteched by tax authorities.

Bombay High Court

M/S.Sargam Foods Pvt.Ltd vs State Of Maharashtra on 8 July, 2010

Bench: P. B. Majmudar, Rajesh G. Ketkar

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4 Replies

Ngaraj N Nyamati (Advocate) 02 May 2012

Overdraftis loan. Money is to due bank. Only credit balance of account holder/firm can only be attached by govt.. Contanct Advocate and seek legal recourse.

Nagaraj N Nyamati,Advocate.

Prasun Chandra Das (Banker) 03 May 2012

I shall try to explain the issue by the following examples:

(1) Rs.100/- overdraft/cash credit facility sanctioned by the bank to X. He utilises Rs.10/-. His balance is Rs.10/-(Debit), available balance is Rs.90/-(Credit). In this case, no amount can be attached by IT Dept because Rs.10/- is due to the Bank, and Rs.90/- (unutilised/unavailed portion of the sanctioned limit of Rs.100/-) is not money due to the Bank. The Bank, not being a Debtor, cannot attach Rs.90/- (as explained in Beni Prasad's post).

2) Rs.100/- overdraft/cash credit facility sanctioned by the Bank to X. He utilises Rs.NIL. His balance is Rs.0, Avaliable balance is Rs.100/-(Credit). In this case, no amount can be attached by IT Dept because Rs.100/- is not money due to the Bank. The Bank, not being a Debtor, cannot attach Rs.100/-

3) Rs.100/-overdraft/cash credit facility sanctioned by the Bank to X. He utilised Rs.NIL. Moreover, he deposits Rs.20/- in the account. His balance is Rs.20 (Credit), Available balance is Rs.20/-(Credit). In this case, the Bank CAN attach ONLY Rs.20/-, because in this case the Bank becomes the Debtor and X has shifted his position to a Creditor.

I hope my understanding is correct. Senior Bankers/Advocates may add/correct this post.

Surendra Gupta (Banker) 10 May 2012

I agree with Shri Prasun Chandra Das

c.p.s. ramachary (1500) 25 July 2012

Overdraft/cash credit is fund based facility. That is the funds are lent by bank to its customer for operating the account for the purpose of the business of the borrower. Any amount remained unutilised represents the 'debt' recoverable by the bank in the event the account goes bad (NPA) in priority to any person or authority and the bank cannot be compelled to pay such amount since the facility is not granted to the borrower to meet the income tax dues. The facility is granted to the borrower after a due scrutiny and credit appraisal based on the business activity of the borrower. Hence Income Tax department cannot lay hand on that unutilised portion of the debt amount.