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2014 (5) TMI 859 - HC - Income TaxRecovery of dues from third person - group company – Disputed debt - Whether the TRO in its attempt to discern whether there is an apparent falsity in EMGF’s affidavit objecting to the alleged liability to EHTPL, has actually adjudicated on the question of a disputed debt, thus exceeding his jurisdiction – Held that:- Section 226(3) does not confer any jurisdiction to adjudicate the indebtedness of a third party to the assessee and was only was confined to first, cases where the third party “admits to owing money or holding money on account of the assessee” - cases where it is “indisputable that the third party owes money or holds money on the account of the assessee” - when liability itself is disputed by the third party, Section 226(3) was no source of power to the AO to adjudicate on that question - It merely empowers the AO to discover falsity in the objections filed by the garnishee, in cases where it is an admitted or an indisputable debt. The TRO held that none of the litigation calls into question the validity of the development agreement - in any event, the debt is not susceptible to being cancelled - The Court differs from the TRO on the limited ground because it would neither be appropriate nor possible for the Court to predict the outcome of any litigation - any number of outcomes could ensue from the litigation through several contractual and other possibilities – the Court reiterates that any potential effect that the litigation may have on the debts in existence, is too distant a contingency to account for, given the need to only decide the existence of an admitted or indisputable liability - the TRO’s own observations, that the consequence of APIIC revoking consent could very well be considered “force majeure”, thus resulting in the EMGF debt continuing to be owed to EHTPL, is consistent with this line of reasoning – Decided against Assessee.
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