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

A private company has an outstanding tax demand that cannot be recovered. The demand includes tax of Rs 8,00,000, interest of Rs 1,20,000 and fees of Rs 30,000 for a tax year. Under section 323 of the Income-tax Act, 2025, what amount is the director who held office during that tax year jointly and severally liable for, if he cannot prove absence of gross neglect, misfeasance or breach of duty?

The director is liable for Rs 9,50,000. Section 323(2) provides that tax due includes penalty, interest, fees or any other sum payable under the Act, so the liability covers tax of Rs 8,00,000, interest of Rs 1,20,000 and fees of Rs 30,000, unless the director proves no gross neglect, misfeasance or breach of duty.

  1. ARs 8,00,000, being the tax only
  2. BRs 9,20,000, being tax and interest only
  3. CRs 9,50,000, being tax, interest and feesCorrect
  4. DRs 8,30,000, being tax and fees only

Explanation

Section 323(2) defines tax due to include penalty, interest, fees or any other sum payable under the Act. The liability is therefore 8,00,000 + 1,20,000 + 30,000 = Rs 9,50,000. Rs 9,20,000 omits the fees.

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