trafford dsouza (legal) 02 December 2014

Income tax to be paid by different person other than assesee

hi everybody

kindly help me out.

i am selling a immovable property to a person A. now A is paying the entire money by way of cheque. he has also agreed to pay whatever income tax liability that i shall be subject to he shall be paying it. this shall be by way of a separate contract, in which he shall be giving me a pdc for the amount that i shall be paying as income tax.

now i want to know:

1) what is the legal validity of such a contract?

2) what is the legality of the cheque and what about the applicability of sec 138 of NI act if the cheque bounces?

thanks in advance

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4 Replies

Hardeep (Business) 02 December 2014

In my opinion : 1) not valid, you are liable for your income tax not anybody else. 2) s. 138 holds only for legally enforceable debt. That not being the case here you will not have recourse to it if the cheque bounces. Better to make rough calculations to include the tax amount in the sales price itself and make an agreement to cover the shortfall if any by means of a cheque. That will reduce your risk.

Advocate Ravinder (Advocate/Attorney) 02 December 2014

Do not accept Cheque. Because if the cheque is dishonoured, you have to file a civil suit to cancel the sale deed. This creates complications. Instead of that take DD or pay order or cash. And also take an additional Income tax applicable as per the consideration amount.

trafford dsouza (legal) 03 December 2014

thanks a lots, guys.

what i was now thinking is that the prospective buyers and a relative of mine enter into an agreement for termination of tenancy as applicable in the state of goa. Condition for termination shall be payment by way of PDC, which amount shall be the tax amount. the prospective buyers have agreed for this.

i think that this is a better way. the tax comes to about 1cr which the the prospective buyer does not have right now. he intends to make and sell plots annd raise money.

kindly advise.

T. Kalaiselvan, Advocate (Advocate) 06 December 2014

You may be having different strategies for sale of properties and payment of taxes suffered on it but it will not fetch you the legal relief, you will be held liable for wrong issues that may develop. An individual has to pay one's tax and a third party cannot be asked to pay it or make an alternate arrangement for that which will be an illegal transaction. Consult a local consultant and proceed further.