If a taxable person with pending tax dues, transfers his business to another person, then the taxable person and the person to whom the business is transferred, shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable person up to the time of such transfer, whether such dues has been determined before such transfer, but has remained unpaid or is determined thereafter. The transferee shall apply for amendment of his certificate of registration to disclose the transferred business.

Sec. 86 – Liability of agent and principal

Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall, jointly and severally, be liable to pay the tax payable on such goods.

Sec. 87 – Liability in case of amalgamation or merger of companies

When two or more companies are amalgamated or merged in pursuance of any order by Court, Tribunal or otherwise and the order is with effect from earlier date and they have supplied or received any goods or services or both to or from each other from the date from which the order take effect till the date of order, then such transactions will be included in the turnover of the respective companies and they shall be liable to pay tax accordingly.

The said two or more companies shall be treated as distinct companies from the date from which the order take effect till the date of order. This is similar to provision u/s. 47 of the MVAT Act. The certificate of registration of the amalgamating/merging company shall be cancelled from the date of such order.

Sec. 88 – Liability in case of company in liquidation

When any company is wound up, every appointed receiver of assets (“Liquidator”) shall give intimation of his appointment to Commissioner within 30 days. On receipt of such intimation Commissioner may notify amount sufficient to recover tax liabilities/dues to the liquidator within 3 months which needs to be provided by the said liquidator.

Secs. 88(3) & 89 – Liability of director of private company in liquidation

When any private company is wound up and any tax or other dues determined whether before or after liquidation that remains unrecovered, every person who was a director of the company during the period for which the tax was due, shall jointly and severally be liable for payment of dues unless he proves to the satisfaction of the Commissioner that such non-recovery is not attributed to any gross neglect, misfeasance or breach of duties on his part in relation to the affairs of the company. The directors of a private limited company, not in liquidation are also liable in similar manner.

Sec. 90 – Liability of partners of firms to pay

Partners of any firm shall jointly and severally be liable for payment of any tax, interest or penalty. Firm/partner shall intimate the retirement of any partner to the Commissioner by a notice in writing. Liability to pay tax, interest or penalty up to the date of such retirement, whether determined on that date or subsequently, shall be on such partner. If no intimation is given within one month from the date of retirement, the liability of such partner shall continue until the date on which such intimation is received by the Commissioner.

Sec. 91 – Liability of guardians, trustees etc.

Where the business in respect of which any tax is payable is carried on by any guardian/trustee/agent of a minor or other incapacitated person on behalf of and for the benefit of such minor/incapacitated person, the tax, interest or penalty shall be levied upon and recoverable from such guardian/trustee/ agent.

Sec. 92 – Liability of Court of Wards etc.

Where the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable is under the control of the Court of Wards/ Administrator General / Official Trustee / Receiver or Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable from such Court of Wards/Administrator General/ Official Trustee/Receiver or Manager to the same extent as it would be determined and recoverable from a taxable person.

Sec. 93 – Special provisions regarding liability to pay tax, interest or penalty in certain cases

1. As per Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty, dies, and his business is continued by his legal representative or any other person, then they will be liable to pay such dues.

   As per Insolvency and Bankruptcy Code, 2016, if the business is discontinued by a person, liable to pay tax, interest or penalty, before or after his death, then his legal representative will be liable to pay out of the estate of the deceased, to the extent to which the estate is capable of meeting the dues, whether such dues are determined before his death or after his death.

2. As per Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty, is a HUF or AOP and the property of HUF or AOP is partitioned amongst the various members or group of members, then each such member shall, jointly and severally, be liable to pay the dues up to the date of partition. Whether such dues are determined before partition or after the partition.
3. As per Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty, is a firm, and the firm is dissolved then very partner shall, jointly and severally, be liable to pay the dues upto the time of dissolution, whether such dues are determined before dissolution or after the dissolution.
4. As per Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty, is a guardian of the ward on whose behalf the business is carried on by the guardian or is a trustee who carries on the business under a trust for a beneficiary, then if the guardianship or trust is terminated, the ward or the beneficiary shall, be liable to pay the dues up to the date of termination of the guardianship or trust, whether such dues are determined before the termination of the guardianship or trust or after the termination of the guardianship or trust.

Sec. 94 – Liability in other cases

1. Where a taxable person is a firm, AOP or HUF, liable to pay tax, interest or penalty, has discontinued business then each such member (i.e. partner of firm or a member of AOP/HUF) shall, jointly and severally, be liable to pay the dues up to the date of such discontinuation, whether such dues are determined before or after the discontinuation.
2. Where a change has occurred in the constitution of a firm, AOP or HUF, liable to pay tax, interest or penalty, then each such member as is existed before or after the reconstitution (i.e. partner of firm or a member of AOP/HUF) shall, jointly and severally, be liable to pay the dues up to the date of such reconstitution of a firm, AOP or HUF. Whether such dues are determined before or after the reconstitution.

Explanation for the purpose of this Chapter:-

1. An ‘LLP’ formed and registered under Limited Liability Partnership Act, 2008 shall be considered as ‘firm’.
2. ‘Court’ means the District Court, High Court or Supreme Court.