In Dineshchandra Bhailalbhai Gandhi v Tax Recovery Officer, Surat, Gujarat High Court recently held that deposits in a public provident fund (PPF) account are immune from attachment for recovery of tax dues.
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In the case, a tax recovery officer (TRO) issued a notice in 2005 under section 226(3) of the Income Tax Act, 1961, to the Salabatpur branch of State Bank of India stating that as the sum of ₹2,516,790 (US$41,700) was due from Gandhi the amount lying in his PPF account was to be remitted to the TRO.
Gandhi challenged the order before the high court, arguing that under section 9 of the Public Provident Fund Act, 1968, the amount outstanding in his PPF account cannot be attached for the recovery of tax dues. The TRO defended its action by relying on a Central Board of Direct Taxes circular of 1990 in which it was clarified that section 9 of the Public Provident Fund Act applies only to attachment under a decree or order of a court of law and not to attachment by the tax authorities.
Rejecting the TRO’s contention the high court held that a conjoint reading of three provisions, namely, section 9 of the Public Provident Fund Act, rule 10 of schedule II to the Income Tax Act and clause (ka) to the proviso to section 60(1) of the Code of Civil Procedure, 1908, makes any amount lying in the PPF account of a subscriber immune from attachment and sale for the recovery of the income tax dues.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
