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CMA Final · Direct Tax Laws and International Taxation · Interest and Fees

A private company defaults on tax due. Which sum is included in 'tax due' for the purpose of the liability of directors under section 323 of the Income-tax Act, 2025?

Tax due includes tax, penalty, interest, fees or any other sum payable under the Act. Section 323(2) defines it so, and directors of the private company are jointly and severally liable for it unless they prove the non-recovery is not due to their gross neglect, misfeasance or breach of duty.

  1. ATax only, excluding penalty
  2. BTax and penalty, excluding interest and fees
  3. CTax, penalty, interest, fees or any other sum payable under the ActCorrect
  4. DOnly interest and fees, since tax is recovered from the company

Explanation

Section 323(2) states that tax due includes penalty, interest, fees or any other sum payable under the Act. Directors are jointly and severally liable unless they prove non-recovery is not attributable to gross neglect, misfeasance or breach of duty. Hence limiting it to tax or tax and penalty is wrong.

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