Part share sale consideration kept with Bank as ‘Escrow’ under Share Purchase Agreement (SPA), cannot be demanded by AO towards tax liabilities of the Company whose shares are transferred; A company is independent entity completely distinct from its shareholders; Neither SPA nor Escrow Agreement provides for any contingency which would enable company whose shares are being transferred to receive funds; Escrow money kept to adjust change in valuation of Company in case tax liability is demanded by Revenue; But the Company can claim any sum from the parties to Escrow Agreement; AO’s action of initiating garnishee proceedings u/s 226(3) to recover money kept as ‘Escrow’ with bank is erroneous : Delhi HC in AAA Portfolios P. Ltd. & Ors.
Complete text of judgement AAA Portfolios-Del HC
