Director is not liable for payment of tax amount when it is not determinable that the Company is unable to pay the tax amount during liquidation proceedings

Last updated: 12 December 2023

Save Share

Quick Summary

The Madras High Court has ruled that directors are not personally liable for a company's tax debts if it's not definitively proven the company cannot pay during liquidation. While directors can be held jointly and severally liable under Section 88(3) of the CGST Act if the company is unable to settle its tax, interest, or penalty dues, this liability only arises if the company's inability to pay is conclusively determined. The court set aside orders demanding tax from an ex-director as the company was in liquidation and the liquidator had not yet determined the company's financial capacity.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of K. Malathi v. State Tax Officer &Anr. [W.P.No.19728 of 2020 & 484 of 2021 dated October 30, 2023]held that, Director is not liable for payment of tax amount when it is not determinable that the Company is unable to pay the tax amount during liquidation proceedings. However as per Section 88 (3) of the Central Goods and Services Tax Act, 2017 ("the CGST Act"), the Directors can be held liable jointly and severally, when it is conclusively determined that the Company is unable to settle the amount of tax, interest or penalty payable.

Citation :
W.P.No.19728 of 2020 & 484 of 2021 dated October 30, 2023

Daily Limit Reached