HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Administrator, Unit Trust of India v. B. M. Malani and Others
Civil Appeal No. 4792 of 2001 with Civil Appeal Nos. 4793-4799 of 2007
[2007] 10 SCR 1138 ·
Income-tax Act, 1961: section 226(3), especially clauses (i) and (vi) · Income-tax Act, 1961: historical section 54EA benefit identified in the scheme materials · Constitution of India: Article 12
Holding and result. Section 226(3) reached money due or held for the assessee, not an unexercised contractual repurchase option; UTI’s appeal failed and the assessee obtained restitution at least to the invested amount plus declared dividends.
Sources & disclosures includedDownload original judgment / order
Two-judge bench; judgment delivered by S. B. Sinha, J. · S. B. Sinha, J. · H. S. Bedi, J.
Assessment years: 1990-91, 1991-92, 1992-93, 1995-96
01 · Facts of the case
The assessee invested Rs.65 lakh in a five-year UTI Monthly Income Plan connected with a capital-gains scheme. Although the plan permitted repurchase after 1 September 2001, he had not exercised that option. On a section 226(3) notice for tax arrears, UTI sold the units at Rs.6.93 and paid Rs.43,69,083.30 to the Department. The assessee had meanwhile paid substantial tax, sought time and offered transfer at face value. The High Court required redemption at Rs.10 per unit; UTI and the assessee filed opposing appeals.
02 · Discussion by the Hon’ble Court
Section 226(3) applied when money was due or held for the assessee. The contractual repurchase choice belonged to the unit-holder; neither UTI nor the Income-tax Officer could exercise it without his consent. Clause (vi) recognised that an amount not then due was not payable under the notice. UTI, as a statutory authority, had to act fairly and within its contract. The Court distinguished fixed deposits and matured policy proceeds where a debtor-creditor or payable-money relationship existed.
Source: Primary judgment: reasoning
03 · Judicial decision
UTI was not authorised to dispose of the units below par merely because it received the recovery notice. On these facts it was not then holding payable money for the assessee within section 226(3), because the contractual option that would create the repurchase entitlement remained unexercised.
Source: Primary judgment: holding
04 · Outcome / in whose favour
UTI’s Civil Appeal No. 4792 of 2001 was dismissed. The assessee’s connected appeals were allowed with costs; restitution included entitlement at least to the Rs.65 lakh invested and dividends declared from allotment.
05 · AKHB REVIEW POINT
AKHB analysis: a garnishee notice must be matched to the underlying asset’s payment terms. Identify whether money is presently due, merely may become due, or depends on a contractual option that nobody has exercised; recovery machinery does not itself rewrite the investment contract.
Source & verification
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Statutory scope
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Later treatment
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