In what could be seen as a landmark judgment, a court in Delhi has held a company under liquidation and its top executive guilty of delayed deposit of tax deducted at source (TDS). The court has ordered a jail term and fine for the Managing Director, besides imposing a fine on the company.The matter is related to default in depositing TDS amounting to over ₹17.68 crore for FY10 by a Noida-based company Naftogaz India within the timeline prescribed under the Income Tax Act. As on date of the survey, the cumulative TDS payable for both FY10 and FY11 was admitted at over ₹21.21 crore It was admitted that all TDS returns for FY10 and FY11 were filed late, and FY12 returns had not been filed at all. The company went into liquidation in 2012. However, the court said: “The fact that the company has subsequently gone into liquidation does not erase the completed offence. Likewise, the winding up of the company cannot, by itself, absolve the Director whose guilt under Section 278B has been found established.” Accordingly, the court found both accused, the company (through the official liquidator) and its Managing Director Mahdoom Bava, guilty of the offences punishable under the Income Tax Act, 1961, for FY10.Announcing the penalty and sentence, the court said that a company being a juristic person cannot undergo imprisonment. “The plea that the company presently has no funds can be relevant to the quantum of fine, but it does not warrant an order that the company be sentenced without any fine at all. Such an approach would reduce a serious statutory conviction of a corporate offender to a declaration without penal consequence,” it said, while adding that at the same time the court must account for the fact that the company is in liquidation and is represented by official liquidator.imposes penaltyAfter going through all the submissions and arguments made, the court directed the company to pay a fine of ₹10 lakh for the offence. The fine shall be payable by the official liquidator from the assets/ funds of the company. In the event that no realisable assets are available, the fine shall be recoverable in accordance with law, and shall not be enforced through impermissible coercive measures against the official liquidator personally.At the same time, the Managing Director was awarded sentence to undergo rigorous imprisonment for a period of 1 year and 10 months with a fine of ₹10 lakh. “In default of payment of fine, the convict shall undergo a simple imprisonment for a period of three months. The default sentence shall not operate as payment or satisfaction of the fine, which shall remain recoverable in accordance with law,” said the court.“Thus, the order reinforces the revenue’s prosecution policy by emphasising that the delayed deposit of TDS is a serious offence warranting effective penal consequences. The judgment also clarifies that liquidation of a company will not negate its criminal liability for TDS defaults,” they added.Published on August 24, 2026