Banks, FIs can't transfer money without investor's consent: SC
The Supreme Court says banks and financial institutions cannot transfer the money invested into scheme promoted to the income-tax department for alleged default in payment of tax by the investor without his consent.
By Sanjay K Singh, TNN |
NEW DELHI: Can banks and financial institutions transfer the money invested into scheme promoted to the income-tax department for alleged default in payment of tax by the investor without his consent? The Supreme Court in a ruling delivered on Thursday has said no.
It has said that the transfer of money by the UTI (now Axis Bank) without the consent of the investor to the revenue department was illegal. The money was invested into its Monthly Income Plan scheme by the alleged defaulter assessee.
One BM Malani had invested an amount of Rs 65 lakh into the scheme offered by the erstwhile UTI under Capital Gains Scheme in 1998. Its lock - in period was for five years. Purchase of its units, however, was allowed from Sep 1, 2001 at NAV based repurchase price.
The bank received a notice from the Revenue under subsection (3) of Section 226 of the Income Tax Act, 1961. In compliance with the demand, the bank paid a sum of Rs 43,69,083 out of the invested money into its scheme after calculating the prevalent value at the rate of Rs 6.93 per unit.
It was challenged before the Andhra Pradesh high court which ruled that the investor was entitled to the redemption value of all the units after five years. Aggrieved by it, the bank came into appeal before the apex court. In turn, the investor, Malani, also filed a cross appeal.
A Supreme Court bench comprising Justice SB Sinha and Justice HS Bedi said that in the absence of any right of option having been exercised by the investor, the appellant bank could not have transferred the amount in question.
"It is wholly incorrect to contend that the scheme itself provided that repurchase was allowed from Sep 1, 2001 even without the consent of respondent (investor). It was for the respondent to give his option" said Justice Sinha writing the verdict.
The court said that Section 226(3) of the act can not be interpreted to mean that UTI was fully authorised to dispose of the units on its own without any notice to the holder of the units. The action on part of the, bank was not valid, ruled the apex court. The court dismissed the appeal filed by the erstwhile UTI bank and allowed the appeal of Malani.
It has said that the transfer of money by the UTI (now Axis Bank) without the consent of the investor to the revenue department was illegal. The money was invested into its Monthly Income Plan scheme by the alleged defaulter assessee.
One BM Malani had invested an amount of Rs 65 lakh into the scheme offered by the erstwhile UTI under Capital Gains Scheme in 1998. Its lock - in period was for five years. Purchase of its units, however, was allowed from Sep 1, 2001 at NAV based repurchase price.
The bank received a notice from the Revenue under subsection (3) of Section 226 of the Income Tax Act, 1961. In compliance with the demand, the bank paid a sum of Rs 43,69,083 out of the invested money into its scheme after calculating the prevalent value at the rate of Rs 6.93 per unit.
It was challenged before the Andhra Pradesh high court which ruled that the investor was entitled to the redemption value of all the units after five years. Aggrieved by it, the bank came into appeal before the apex court. In turn, the investor, Malani, also filed a cross appeal.
A Supreme Court bench comprising Justice SB Sinha and Justice HS Bedi said that in the absence of any right of option having been exercised by the investor, the appellant bank could not have transferred the amount in question.
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"It is wholly incorrect to contend that the scheme itself provided that repurchase was allowed from Sep 1, 2001 even without the consent of respondent (investor). It was for the respondent to give his option" said Justice Sinha writing the verdict.
The court said that Section 226(3) of the act can not be interpreted to mean that UTI was fully authorised to dispose of the units on its own without any notice to the holder of the units. The action on part of the, bank was not valid, ruled the apex court. The court dismissed the appeal filed by the erstwhile UTI bank and allowed the appeal of Malani.
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