Holding

Section 226(3)(vi) does not empower the holder of units to dispose of them without the assessee’s exercised option, and since the amount was not due, the units could not be transferred; the investor is entitled to redemption at par and dividend.

Summary

B.M. Malani invested Rs 65 lakhs in a Unit Trust of India (UTI) monthly‑income scheme in 1998, seeking exemption under Sec. 54AE. The scheme stipulated a five‑year lock‑in and that units could be redeemed only at face value (Rs 10) after the lock‑in, with repurchase option exercisable by the investor from 1 Sept 2001. Malani defaulted on income‑tax liability; the tax department issued a notice under Sec. 226(3) of the Income‑Tax Act to UTI, demanding payment of Rs 48.08 lakhs from the units. UTI calculated a unit price of Rs 6.93 and paid the amount, effectively selling the units without Malani’s consent. The High Court held that Malani was entitled to redemption at Rs 10 per unit and to dividends. UTI appealed, arguing that Sec. 226(3)(vi) authorised it to dispose of the units as it held them on behalf of a defaulter. The Supreme Court held that Sec. 226(3) applies only when money is due to the assessee, and clause (vi) creates a legal fiction that no payment is required if the amount is not payable; since Malani had not exercised the repurchase option, UTI could not transfer or sell the units. Consequently, UTI’s appeal was dismissed and Malani’s appeal allowed, entitling him to redemption at par and dividend.

Issues considered

The scope and interpretation of Sec. 226(3)(vi) of the Income‑Tax Act, 1961 in relation to a person holding money on behalf of an assessee‑in‑default.
Whether the amount demanded from UTI was due to the assessee at the time of the notice.
Whether UTI could sell or transfer the units without the investor’s consent under the scheme’s terms.
Whether the investor is entitled to redemption at face value and dividend despite the tax department’s notice.

Legislation cited

Income Tax Act, 1961s. 226(3), s. 54AE

Subjects

Income TaxSection 226UTI schemeCapital GainsRedemptionDefaulterContractual obligationLegal fictionTax penaltyDividend

Judgment

.--l

A ADMINISTRATOR, UNIT TRUST OF INDIA
v.
B.M. MALAN! AND ORS.

OCTOBER 11, 2007
B
[S.B. SINHA AND H.S. BEDI, JJ.]

Income Tax Act, 1961-s. 226(3)-lnterpretation of-Assessee
defaulter of payment of income tax-UT! holding units under the
c Scheme on assessee 's behalf-Income Tax Department issuing notice
to UT! raising demand on account ofincome tax penalty by assessee-
UT! selling units below par without assessee ~<;consent and making part
payment-High Court holding units to be redeemed at par-
Correctness of-Held: UT! could not have tran4erred the amount, in
D absence of any right of option of repurchase of units having been
exercised by assessee-s. 226(3)(vi) cannot be interpreted to mean that
UT! was fully authorised to dispose ofthe units on its own-UT! could
hold the amount only ·when assessee had exercised his option-More
so, assessee made sincere efforts to pay tax-Thus, assessee to be
E restituted with the dividend declared on the amount.
Respondent-assessee invested Rs. 65 lakhs in Monthly Income
Plan of Unit Trust oflndia under Capital Gains Scheme in 1998 to
~
seek exemption under section 54AE of the Income Tax Act, 1961.
The capital invested in the scheme was protected on maturity. The
F
face value of the units was Rs 10/- and the units were not to be
redeemed below par. Respondent defaulted in payment ofincome
tax. Income Tax Officer issued notice to the appellant-Unit Trust of
India under section 226(3) of the Act raising a demand of Rs.
48,08,000/- from the amount held by UTI for or on ac'count of
G assessee, regarding the income tax penalty imposed on the y

respondent. Appellant calculated the unit price at the rate of Rs. 6.93
per unit and paid Rs. 43, 69,083.30 to the Department. Though the
units were transferred, their value had not become due to the
assessee on the date on which such notice was given. Respondent
H 1138
ADMINISTRATOR, UNIT TRUST OF INDIA v. 1139
B.M.MALANI
filed writ petition challenging the action of the appellant in resorting A
to sale of the units without his consent. High Court held that the
respondent was entitled to the redemption value of the units at the
rate of Rs. 10/- per unit after five years. Hence the present appeals.
Appellant-UTI contended that the respondent being a defaulter
and the appellant having been holding the units on its behalf, the B
High Court erred in passing the impugned judgment; that the units
were transferable on the day on which the payments were made and
keeping in view the purported tenor of the notice in terms whereof
the appellant was to be treated as assessee-in-default, it had no other
option but to make payment. C
Dismissing the UTl's appeal and allowing assessee's appeal,
the Court
HELD: 1.1 Section 226(3) of the Income Tax Act, 1961 would
) be applicable only when a money is due to the assessee from any D
person. Clause (vi) of sub-section (3) of Section 226 of the Act in
categorical terms created a legal fiction to the effect that when an
amount is not payable, the assessee is not required to pay any such
amount or part thereof. [Paras 13 and 16] [1147-A; 1148-E]
E
2.1. Appellant is a statutory authority. It had floated the Capital
Gains Scheme. The scheme constituted a contract between the
parties. Under the Scheme the lock-in period was for five years. The
repurchase was allowed only from 1st September, 2001.
Indisputably, the respondent did not opt therefor. In absence of any F
right of option having been exercised by the respondent, the
appellant, could not have transferred the amount in question. It is
wholly incorrect to contend that the scheme itself provided that
repurchase was allowed from 1.9.2001 even without the consent of
the respondent. It was for the respondent to give his option.The G
Income Tax Officer could not have exercised the said option on
behalf of the assessee. The stand of the Income Tax Department
also was that it sought to attach the units and did not opt for the
repurchase value at that point of time.
[Paras 15] [1147-B, C, D; 1148-B] H
-·~

1140 SUPREME COURT REPORTS · [2007] I 0 S.C.R.

A 2.2. Respondent was a defaulter to the extent ofRs.157. 77 lacs~
He sold some of the properties. A portion of sale proceeds, Rs. 65
lakhs had been invested with the appellants under the units. He filed
an application for settlement before the Settlement Commissioner.
He had deposited a sum of Rs.25 lacs when moving an application
B for deposit of the amount. Upto October 2000, he had already paid
a sum of Rs.92.04 lacs. Only a sum ofRs.48,08,000/-was due from
him and with regard to the same he sought time for payment.
[Para 12] [1146-A, B, CJ .
2.3. Respondent made all sincere efforts to pay the tax. It made
C an offer to the Income Tax Officer to transfer the bonds at their face
value at Rs.10/- per unit. Unfortunately, the Income Tax Department
neither replied to the said letter nor paid and heed to his request.
Respondent had invested a sum of Rs.65 lacs. Therefore, he was
entitled to, at least, that amount. Government oflndia had already
D been considering the matter of reimbursement to the holders of the
units at least at the purchase rate. Thus, it not only acted hastily
but also illegally. As a State, within the meaning of Article 12 of the
Constitution, it was required to exercise restraint and give effect to
the provisions of the contract in a reasonable manner. Appellant
E being a statutory authority should have acted strictly in terms of the
conditions of the contract. It was to act reasonably and fairly.
[Para 16] [1148-C, D, E]
2.4. Section 226(3)(vi) cannot be interpreted to mean that the
F Unit Trust oflndia was fully authorised to dispose of the units on its
own without any notice to the holder of the units. In a situation of
this nature, having regard to sub-section (3) of Section 226 of the
Act, it cannot be said that the appellant was holding the money of
the respondent. The amount in question could have been held by the
G appellant only when the respondent had exercised his option
therefor. [Paras 18 and 19] [1148-G; 1149-A-B]

2.5. Respondent No.1 never authorised the Unit Trust of India
to sell the same in the market at the lower price as respondent No.1
has stated in his letter that due to the fall in the prices in the market,
H he was not able to dispose of the units. Respondent No.1 further
I
f--
ADMINISTRATOR, UNITTRUSTOFINDIA v. 1141
B.M. MALANI [SINHA, J.]
prayed time till May 2002 to clear the dues and was awaiting. A
information from Respondent Nos.2 and 3 but in the meantime the
petitioner sold the same in the market without any intimation to
respondent No.1. Therefore, there is no error in the judgment of
High Court as the respondent is entitled to be restituted. Respondent
was also entitled to dividend declared during the said period viz. from B
the date of allotment. The High Court was not correct in not
considering that aspect of the matter.
(Paras 17 and 23] (1148-F, G; 1150-E, F]
Life Insurance Corporation of India and Anr. v. Gangadhar
Vishwanath Ranade (dead) by Lrs., [1989] 4 SCC 297, distinguished. C
Vysya Bank Ltd. v. Joint Commissioner ofIncome Tax, 241 ITR
178, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4792 of
2001. n
From the Judgment and final Order dated 27.8.2004 of the High
Court of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No.
23025 of 2002.
WITH E

C.A. Nos. 4793-4799 of 2007.
M.L. Verma, Sanjay Kapur, Shubhra Kapur and Raj iv Kapur for
the Appellant.
F
R.G. Padia, D.K. Singh, Pradeep Shukla, B.V. Balaram Das and
S.V. Deshpande for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. I. Leave granted. G
y
2. Interpretation of sub-section (3) of Section 226 of the Income
Tax Act, 1961 (Act) is involved in these appeals which arises out of a
judgment and order dated 27.8.2004 passed by the High Court of
Judicature of Andhra Pradesh at Hyderabad in Writ Petition No.2305
H

1 1
I

--1
1142 SUPREME COURT REPORTS [2007] 10 S.C.R.

A of2002 whereby and whereunderthe writ petition filed by B.M. Malani
(hereafter referred to as the respondent) was allowed in part.
3. Respondent is an assessee of income tax. He was admittedly a
defaulter in payment of income-tax. He had invested an an10unt of 65
' lacs in the Monthly Income Plan (III) offered by the Unit Trust oflndia
B
under Capital Gains Scheme, the predecessor in interest of the petitioner
in the year 1998 with an object to seek exemption under Section 84-E
of the Act. The 'Highlights' projected for such an offer were as under: -(

* "A five year close ended income plan
c * The plan offers three options 1) Monthly Income Option, 2)
Annual Income Option & 3) Cumulative Option
* The face value of a unit is Rs. l 0/- and units will be sold at
par.
D * The Trust shall pay an assured income@ 12.50% p.a. payable
monthly under monthly income option and @ 13.25% p.a.
payable annually under annual income option, for all the five
years of the plan.
* Under the Monthly Income Option, income distribution
E warrants for the period upto March 1999 will be sent along
with the membership advice/unit certificate. Thereafter income
warrants payable monthly will be sent in advance for every
April-March period.
* Repurchase allowed from lst September, 2001 at NAV based
F
repurchase price under all the three options.
* Scheme shall be listed on the whole sale debt segment of the
NSE within six months from the closure of subscription.
* It is guaranteed that the capital invested in the scheme will be
G protected on maturity i.e. units will not be redeemed below y
par. The Development Reserve Fund (DRF) of the Trust will
guarantee this capital protection. There is no such guarantee
for premature repurchases and the repurchase price in such;
cases will be as per prevailing NAV. There is scope for capital
H
ADMINISTRATOR, UNIT TRUST OF INDIA v. 1143
B.M. MALAN! [SINHA, J.]
appreciation as a part of investment will be in equities. A
* Tax benefits under Section 80L and Sections 48 and 112 of
Income Tax Act, 1961 on income distributed and capital gains
from capital appreciation. Capital gains tax exemption under
Section 54EA of the Income Tax Act, 1961 subject to lock-
in for three years from the date of acceptance." B
4. Appellant received a notice from the Income Tax Department
purported to be under sub-section (3) of Section 226 of the Income Tax
Act. In compliance of the demand made therein, a sum of
Rs.43,69,083.30 p. was paid to the Department by the appellant c
wherefor, the value of the unit at the relevant time was calculated at the
rate of Rs.6.93 p. per unit.
5. Respondent herein filed a writ petition questioning the said action
of the appellant in resorting to sale of the said units without his consent.
D
> 6. Admittedly, although the units were transferred, their value had
not become due to the assessee on the date on which such notice was
given. It was held by the High Court that the respondent was entitled to
the redemption value of the units at the rate of Rs.10/- per unit after five
years. E
7. Appellant is, thus, before us. An appeal has also been filed by
the respondent contending that the dividend declared on the said amount
also should have been directed to be paid by the High Court.
8. Mr. M.L. Verma, learned senior counsel appearing on behalf of F
the appellant, would submit that the respondent being a defaulter and the
appellant having been holding the units on its behalf, the High Court
committed a serious error in passing the impugned judgment. The learned
counsel urged that admittedly the units were transferable on the day on
which the payments were made and keeping in view the purported tenor G
of the notice in terms whereof the appellant was to be treated as an
assessee-in-default, it had no other option but to make payment.
9. Mr. Deshpande, learned counsel appearing on behalf of the
respondent, on the other hand, would support the impugned judgment.
H
1144 SUPREME COURT REPORTS [2007] 10 S.C.R. '·
~

A 10. Sub-section (3) of Section 226 of the Act reads as under:
"(3)(i) The Assessing Officer or Tax Recovery Officer may, at any
time or from time to time, by notice in writing require any person
from whom money is due or may become due to the assessee or
any person who holds or may subsequently hold money for or on
B account of the assessee to pay to the Assessing Officer or Tax
Recovery Officer either forthwith upon the money becoming due
or being held or at or within the time specified In the .notice (not
being before the money becomes due or is hetd) so much of the
money as is sufficient to pay the amount due by the assessee in
c respect of arrears or the whole of the money when it is equal t<?
or less than that amount.
(ii) to (v)
(vi) where a person to whom a notice under this sub-section is
D ;;;ent objects to it by a statement on oath that ~he sum demanded
or any part thereof is not due to the assessee or that he does not ··"
hold any money for or on account of the assessee, then nothing
contained in this sub-section shall be deemed to require such person
to pay any such sum or part thereof, as the case may be, but if it
E is discovered that such statement was false in any material particular,
such person shall be personally liable to the Assessing Officer or
Tax Recovery Officer tri the extent of his own liability to the
assessee on the date of the notice, or to tfie extent of the assessee's
liability for any sum due under this Act, whichever is less."
F
11. Indisputably, a notice was issued by the Income Tax officer upon
the Branch Manager of the Unit Tmst oflndia wherein, inter alia, it was
stated:
"A sun1 of Rs.48,08,000/- is due from B.M. Malani of Hyderabad
G on account oflncome-tax penalty. You are required hereby under
Section 226(3) of the Income-tax Act, 1961 to pay to me
forthwith any amount due from you to or, held by you, for or on
account of the said assessee upto the amount of arrears shown
above.
H
ADMINISTRATOR, UNIT TRUST OF INDIA v. 1145
B.M. MALANI [SINHA, J.]
1: I also request you to pay any money which may subsequently A
become due from you to him/them or which you may subsequently
hold for or on account of him/them upto the amount of arrears still
remaining unpaid, forthwith on the money becoming due or being
held by you as aforesaid.
3. Any payment made by you in compliance with this notice is in B
law deemed to have been made under the authority of the said
assessee and my. receipt will constitute a good and sufficient
discharge of your liability to the person to the extent of the amourit
referred in the receipt.
c
4. Please note that if you discharge any liability to the assessee
after receipt of this notice you will be personally liable to me as
Assessing Officer/Tax Recovery Officer to the extent of the liability
discharged, or to the extent of the liability of the assessee for taxi
penalty interest/fine referred to in the preceding para, whichever D
is less. ·
5. Further, if you fail to make payment in pursuance of this notice,
you shall be deemed to be an assessee in default in respect of the
amount specified on this notice and further proceeding may be taken
against you for the realisation of the amount as ifit were an arrear E
of tax due from you in the manner provided in Section 222 to 225
of the Income Tax Act, 1961 and this notice shall have the same
effect as an attachment of a debt under Section 222 of the said
Act.
F
6. The necessary challan(s) for depositing the money to the credit
of the Central Government is/are enclosed.
7. A copy of this notice is being sent to the afore-mentioned
assessee."
G
12. Whether the action on the part of the appellant to act thereupon
was valid, is the question. TI1e scheme, the relevant provision whereof
had been noticed by us hereinbefore, goes to show that the lock-in period
was for a period of five years. Purchase of the units, however, was allowed
from 1st September, 2001 at NAV based repurchase price. The scheme H
1146 SUPREME COURT REPORTS [2007] 10 S.C.R.

A constituted a contract between the parties. The option of the purchase
was to be exercised by the respondent. Appellant, on the basis of the
said purported notice dated 8.2.2002, could not have placed itself in the
shoes of the respondent. It is not in dispute that the respondent was a
defaulter to the extent of Rs.157.77 lacs. He had sold some of his
B properties in 1998. A portion of the sale proceeds, namely, 65 lacs had
been invested with the appellant. He had sought for exemption under
Section 54AE of the Act. The amount of 65 lacs was secured under the
said units with the appellants. It is not in dispute that an application for
settlement was filed before the Settlement Commissioner by the
c respondent. He had deposited a sum of Rs.25 lacs when moving an
application for deposit of the amount. Upto October 2000, he had already
paid a sum of Rs.92.04 lacs. Only a sum ofRs.48,08,000/- were due
from him. He, therefore, in his letter dated 4.2.2002 stated as under :
"Sale of Bonds at present would result in a loss ofRs.3 per unit
D which will be about 30% loss and it would be difficult to bear such
loss while the taxes are pending payment. In the event the Bonds
are sought to be acquired by the Department, I shall transfer them
at its face value at Rs. l 0/- per unit against taxes although I am
voluntarily making the tax payments as per commitments.
E
In the above facts and circumstances, with a great constrains I had
paid tax Rs.25.00 lakhs on 31.1.2002 as committed by me in my
petition dated 26.10.2001 although I had sought time for above
payment till the end of February 2002. It may also be submitted
that I had sold my property for the purpose of payment of taxes
F
and opted an additional tax burden of Rs.35.00 lakhs under the
Settlement Commission Orders and Co-operated with the
Department. In the circumstances, I request you sir to grant time
for payment of balance tax till the end of May 2002 as I am given
to understand after the budget is presented, the capital gains Bonds
G issued by Unit Trust of India are likely to be purchased by the y

Government at par@Rs.10/- per Unit in whl'ch case I will not
suffer loss on sale and the market rate for sale of such units will
also go up. The department was good enough to grant time earlier
for payment of tax and I have kept my commitments at all the times
H
ADMINISTRATOR, UNIT TRUST OF INDIA v. 1147
B.M. MALAN! [SINHA, J.]
and accordingly paid the tax." A

13. Sub-section (3) of Section 226 of the Income Tax Act would
be applicable only when a money is due to the assessee from any person.
Was the amount due to the assessee when the notice dated 8.2.2002
was issued is the question?
B
14. Appellant is a statutory authority. It had floated the scheme. It
knew the terms and conditions thereof. On a plain reading of the highlights
of the scheme, relevant provisions whereof have been noticed by us
hereinbefore, it is evident that repurchase was allowed only from 1st
September, 2001. Indisputably, the respondent did not opt therefor. In C
. absence of any right of option having been exercised by the respondent,
the appellant, in our opinion, could not have transferred the amount in
question. It is wholly incorrect to contend that the scheme itself provided
-that repurchase was allowed from 1.9.2001 even without the consent of
the respondent. It was for the respondent to give his option. The Income D
Tax Officer could not have exercised the said option on behalf of the
assessee. Curiously, the Income Tax Department itself, in its counter
affidavit filed before the High Court, categorically stated :
"In reply to the averments made in para I 0 of the affidavit, it is
submitted that the letter addressed to the petitioner on 7.12.200 I E
which was served on the same date clearly spe~ about the actual
demand outstanding for payment. From out of that, the petitioner
paid an amount of Rs.25,00,000/- on 31.1.2002. Hence the net
figure reported in the attachment proceedings is quite correct i.e.
(Rs.73.08 lakhs - Rs.25.00 Lakhs). It is pertinent to mention here F
that though the petitioner once again approached Settlement
Commission on the levy of interest as wholly unjustified and
untenable on 4.2.2002, nothing is heard from the Settlement
Commission before initiating the proceedings for attachment, i.e.,
by way of any letter from the Settlement Commission for stay of G
demand till the outcome of the Settlement Commission's Report.
. Secondly, though the units have been attached the UIT which when
the units are there for sale ought to have obtained the consent of
the petitioner before sale and as such the loss, if any on account
of sale, i.e., Rs.21.31 lakhs cannot be attributed to the 2nd H
1148 SUPREME COURT REPORTS [2007] 10 S.C.R.

A respondent. The petition for waiver of interest filed before the
Commissioner oflncome Tax, V, Hyderabad has been rejected
for Asst. year 1990-91, 91-92, 92~93 & 95-96 Vide Commissioner
of Income Tax Proc. No.CIT.V/220(2A)/J/2002-03 dated
26.11.2002.
B.
15. Thus, the stand of the Income Tax Department also was that it
sought. to attach the units and did not opt for the repurchase value at that
poi11:t of time.
16. We have noticed that the respondent made all sincere efforts to
C pay the tax'. It made an offer to the Income Tax Officer to transfer the
bonds at their face value at Rs. I 0/- per unit. Unfortunately, the Income
Tax Department neither replied to the said letter nor pttid and heed to his
request. Respondent had invested a sum ofRs.65 lacs.' He, therefore,
was entitled to, at least, that amount. Government ofinElia._had already
I) been considering the matter of reimbursement to the holders of the units
at least at the purchase rate. In that view of the matter, it must be held
that it not only acted hastily but also illegally. As a State, within the meaning
of Article 12 of the Constitution of India, it was required to exercise
re~traint and give effect to the provisions of the contract in a reasonable
E manner. Clause (vi) of sub-section (3) of Section 226 of the Act in
~tegorical terms created a legal fictiori to the effect that when an amount
is .not payable, the as~essee is not required to pay any such amount or
part thereof Appellant beipg astatut~ry authority should have acted strictly
in terms of the conditions of the contract. It was to act reasonably and
F fairly.
17. Respondent No.I never authorised the Unit Trust oflndia to
sell the sanie in the market at the lower price as respondent No.1 has
stated in the letter dated 4th February, 2002 that duetothe.fall in the
prices in the market, he was not able to dispose of the units. Respondent
G No. I further prayed time till May 2002 to clear the dues and was awaiting y
information from Respondent Nos.2 and J but in the meantime the
petitioner sold the same in the market without any intimation to respondent
No.l
18. Section 226(3)(vi) cannot be interpreted to mean that the Unit
H
ADMINISTRATOR, UNIT TRUST OF INDIA v. 1149
B.M. MALAN! [SINHA,J.]
Trust of India was fully authorised to dispose of the units on its own without A
any notice to the holder of the units.
19. Reliance has been placed on Life Insurance Corporation of'
India & Anr. v. Gangadhar Vishwanath Ranade (dead) by Lrs.,
[1989] 4 SCC 297 is misplaced. In a situation of this nature, having regard B
to sub-section (3) of Section 226 of the Act, it cannot be said that the
appellant was holding the money of the respondent. The amount in question
could have been held by the appellant only whether the respondent had
exercised his option therefore. The fact situation obtaining therein was
absolutely different. In that case, the paid up policies taken by the
respondent. He assigned the same in favour of his wife. Assignment made C
was registered although notice under sub-section (3) of Section 226 was
issued before the policy was matured. No statement on oath was made
under clause (vi) thereof raising an objection on the basis of the registered
assignment. It was in that situation opined :
D
"It is, therefore, obvious that the question of revocation of the
notice under Clause (vii) of Sub-section (3) of Section 226 of the
Income Tax Act, 1961 arose in the present case only after the
L.I.C. made the requisite statement on oath under Section
226(3)(vi) of the Act in view of its consistent stand throughout E
that the moneys due under the policies were held by it for and on
behalf of the assignee and not the defaulter. Mere information of
the assignment to the 1.T.O. and keeping the assignee informed of
the l.T.O.'s action did not amount to discharge of the statutory
obligation under Section 226(3)(vi) of the Act, by the L.l.C. The f'
statute having expressly provided the mode of raising such an
objection in the form of a statement on oath specified in Clause
(vi), performance of that obligation by the notice had to be made
only in that manner. This statutory obligation was performed by
the L.I.C. only on 5.12.1975 as stated earlier. The personal liability
arising after making the requisite statement on oath as envisaged G ·
by Clause (vi) is only "if it is discovered that such statement was
false in any material particular and not otherwise."

20. The said decision has no application in the facts and
circumstances of the present case. H
I

1150 SUPREME COURT REPORTS (2007] 10 S.C.R.
'1
A 21. Reliance has also been placed upon a decision of a learned Single ')-' -1
Judge of Karnataka High Court in Vysya Bank Ltd. v. Joint
Commissioner of Income Tax, [241ITR178]. In that case, the Bank
was holding the money on behalf of the judgment-debtor. The money was
lying with the bank on fixed deposit. The said fixed deposit was made on
B interest. It was in that situation opined :
"The banker becomes a debtor of the assessee in default the
moment the fixed deposit receipt is obtained. Normally the payment
of the fixed deposit receipt on the due dates. But on forgoing
interest or paying lesser rate of interest the bankers generally pennit
c customers to withdraw the amount of the fixed deposits before the
maturity date. The fixed deposit receipt is not a negotiable
instrument but could be assigned with the concurrence of the bank
in favour of other persons attachment of the amount in the fixed
deposit could be made by the income-tax authorities under the
D proviso to section 226(3) of the Income-tax Act."
22. The banker becomes a debtor of the assessee-in-default on
maturity of the fixed deposit scheme. The fixed deposit itself could have
been a subject matter of the judgment.
E 23. We, therefore, do not find any error in the judgment of the High
Court as the respondent is entitled to be restituted. We are of the opinion,
that the respondent was also entitled to dividend declared during the said
period viz. from the date of allotment. The High Court was not correct in
not considering that aspect of the matter.
F
24. For the reasons aforementioned, the appeal filed by the
Administrator, Unit Trust oflndia is dismissed and the appeal filed by B.M.
Malani is allowed with costs. Counsel's fee assessed at Rs.25,000/-
(Rupees twenty five thousand only).,
G NJ. CA. No. 4792 of 2007 dismissed.
and C.A. Nos. 4793-4799of2007 allowed.