Legal Question in Banking Law in India

Commercial tax liablity over Mortgage assest

Dear Sir,

We are planning to buy a Property which is under mortgage of a Government Finance Corporation through auction.

But we find that there is Commercial tax penalties levied over the Borrower of the Government Finance Corporation (who�s property, the Land and Building is given as primary and collateral for mortgage). Who has carried out the business in the Mortgaged place.

The Commercial tax has incurred while he was doing business.

The Government Finance Corporation is ready to sell the property to us and say that the commercial tax of the borrower will not bind the Property that is auctioned.

If we buy this property, will the Commercial Tax department claim the tax of the Borrower from us.

Does the Commercial Tax department have the right to claim its tax and penalties from us even after the title is transferred in our name.

Kindly explain as soon as possible.


Asked on 10/31/08, 8:29 am

4 Answers from Attorneys
J. Radhakrishnan independent Practice

Re: Commercial tax liablity over Mortgage assest

Many State Sales Tax laws contain a provision that commercial tax arrears are first charge on the dealer's property. Please check with the particular State Tax Law and if there is no such provision as above, the auction purchaser will get a good title without any claim for the arrears of tax. Otherwise, the property purchased by the auction purchaser will be liable for sales tax arrears of the mortgagor, notwithstanding the auction being by the State Finance Corporation

Read more
Answered on 10/31/08, 10:03 pm
Aniruddha Pawse Aniruddha.P.Pawse Advocates

Re: Commercial tax liablity over Mortgage assest

depends on the state laws you are in

Read more
Answered on 11/07/08, 8:27 am
Sudershan Goel India Law Offices of Sudershan Goel - Advocate

Re: Commercial tax liablity over Mortgage assest

It will depend upon local laws. Usually, the property of the tax-payer is a 'charge' against payment of tax. In the present case, depending upon the title of the seller, the property may or may not be exempted from 'recovery' proceedings. Your facts are not sufficient to determine the liability against concerned property.

Read more
Answered on 10/31/08, 11:15 am
Nasir Butt Nasir Law Associates

Re: Commercial tax liablity over Mortgage assest

In general, government dues are "charge" against person or property, whichever is applicable. Apart from the legal position in your area, you must consider it payable even titled is transferred in your name. You must be ready to pay arrears. You must calculate the amount of arrears and then determine the sale price, then if it seems to be good bargain, then go ahead and purchase the property, otherwise drop the idea.

Read more
Answered on 11/05/08, 8:59 am


Related Questions & Answers

More Banking Law questions and answers in India