Thursday, 3 March 2016


If there’s a dispute over taxes, there’s now a way for a company to prevent its property being attached. It can give a bank guarantee to the tax officer to prevent property, such as a factory, from being attached during the course of a tax assessment.

The Budget proposals provide that a tax official can revoke an order for provisional attachment of the property if the taxpayer furnishes a bank guarantee equal to the fair market value of the property, or of an amount sufficient to protect the interests of the revenue authorities. Within 15 days of receipt of the bank guarantee, or within 45 days if the case has been referred to a valuation officer, the order for attaching the property is to be revoked. This proposal will come in force from June 1, 2016.

Business entities operating in India, often find that their property, such as an office or a factory building, is attached by the tax authorities during the course of assessment. For instance, operations froze at Nokia’s manufacturing facility near Chennai after it was attached by tax authorities in 2013. More recently, when Vodafone received a fresh tax demand of Rs 14,200 crore, the notice also said that Vodafone’s assets in India could be seized if the disputed demand was not paid.

A high-level committee led by Justice Easwar had pointed out that tax officials have the power to provisionally attach a taxpayer’s assets, with the permission of higher level authorities, if it was necessary to protect the interests of the tax de partment. Such attachment is supposed to be temporary -six to 24 months. However, in many cases, the taxpayer files a writ, or approaches the Authority for Advance Ruling and obtains a stay on regular assessment. This prolongs the duration of the assessment and the property remains attached causing disruption in business operations.The Budget proposals have taken the recommendations of this committee into consideration.


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