Chapter 16

Section 85: Liability in Case of Transfer of Business

• If a taxable person transfers business (sale, gift, lease, etc.), both the transferor and transferee are jointly and severally liable for taxes, interest, or penalties up to the time of transfer.
• Transferee must pay taxes on supplies made after the transfer and, if registered, update the registration certificate.

 

Section 86: Liability of Agent and Principal

• Both an agent and principal are jointly liable for tax on goods/services supplied or received by the agent on behalf of the principal.

 

Section 87: Liability in Amalgamation or Merger

• Companies merged or amalgamated are considered distinct until the effective date of the merger.
• Inter-company transactions during the interim period are taxable.
• Registration certificates of merged companies are cancelled from the merger date.

 

Section 88: Liability in Case of Company Liquidation

• Liquidator must inform the Commissioner within 30 days of appointment.
• Commissioner notifies the liquidator of estimated tax, interest, or penalty.
• Directors of a private company can be held jointly and severally liable if taxes remain unrecovered, unless they prove no gross neglect or mismanagement.

 

Section 89: Liability of Directors of Private Company

• Directors are liable for unpaid taxes unless non-recovery is not due to neglect/misfeasance.
• Converts to a public company? Previous director liability does not continue, except for personal penalties.

 

Section 90: Liability of Partners of Firm

• Partners are jointly liable for taxes due from the firm.
• Retiring partners are liable for taxes up to retirement date, if notified to the Commissioner.

 

Sections 91 & 92: Liability of Guardians, Trustees, and Court of Wards

• Guardians, trustees, and court-appointed managers are liable as if they were the business owner.

 

Section 93: Special Provisions

• Death of a taxable person:
  • If business continues → legal representative liable.
  • If discontinued → estate liable.
• HUF or AOP: members are jointly liable after partition.
• Dissolved firms: partners remain liable.
• Termination of guardianship/trust: ward or beneficiary becomes liable.

 

Section 94: Liability in Other Cases

• Firms, AOPs, or HUFs that discontinue or reconstitute: members/partners are jointly liable for taxes, interest, or penalty.
• LLPs are treated like firms for this purpose.

 

Enforcement: All provisions effective from 1st July 2017.