HC ruling on waiver of commercial tax arrears

It cannot be a reason to bar further proceedings, says High Court

Mere filing of an application by a private firm to the State Government seeking waiver of commercial tax arrears would not act as an impediment for the Commercial Tax Department to attach properties belonging to the company’s sister concerns for recovering the arrears, the Madras High Court Bench here has said.

Justice R. Subbiah made the observation while dismissing a writ petition filed by Hotel Sangam at Kaaka Thoppu Street here.

The hotel was owned by a group of partners who also owned Maapillai Vinayagar Cine Complex, Mappillai Vinayagar Roller Flour Mills, Mapillai Vinayagar Spinning Mills and Manicka Vinayagar Spinning Mills.

Filing an affidavit on behalf of the hotel, one of its partners K. Balamuruganandam, said that the Commercial Tax Department had initially attached the multiplex by invoking the Revenue Recovery Act in October 2007 for non-payment of tax arrears by the three other firms. The attachment was raised after payment of Rs.5.95 lakh.

However, last year, they came know that the department had created an encumbrance on the hotel property too by forwarding a copy of an attachment order to the Sub-Registrar’s office. Enquiries revealed that the attachment was made for recovering tax arrears to the tune of Rs.61.16 lakh to be paid jointly by the flour mill and two spinning mills.

Challenging the attachment order in the present case, the petitioner claimed that the spinning mills were classified as private limited companies and, therefore, the authorities were barred from attaching the hotel, which was a partnership firm registered under the Indian Partnership Act, for non-payment of tax arrears by the two companies.

On the other hand, Additional Government Pleader R. Karthikeyan contended that there was no illegality in attaching the hotel property as the tax arrears were to be collected not only from the two private limited companies but also from the flour mill, a partnership firm. The law permits attachment of one private firm’s properties for recovery of dues from its sister concern.

Agreeing with the submissions made by the AGP, the judge said that an application made for waiver of arrears to the tune of Rs. 15 lakh to be paid by the flour mill could not be reason to discard its liability until the government takes a decision one way or the other.

As far as the present attachment was concerned, it was also in respect of the flour mill dues and hence there was no illegality in it, he added.