Sections 35-36 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
When a company or a firm owes tax under this Act and the amount cannot be recovered from it, sections 35 and 36 reach the people behind it. Section 35 makes a manager of a company jointly and severally liable, subject to a defence. Section 36 makes every participant in an unincorporated body jointly and severally liable along with the body, with a special rule for a limited liability partnership. This article reads both from the Act as enacted and published in the Gazette of India on 27 May 2015.
A person who was a manager of a company at any time during the financial year is jointly and severally liable for the company's dues for that year if they cannot be recovered from the company, unless he proves that non-recovery cannot be attributed to his neglect, misfeasance or breach of duty. Every participant in an unincorporated body at any time during the financial year, or the representative assessee of a deceased participant, is jointly and severally liable along with the body.
Section 35(1) and (2): the manager's liability and defence
Section 35(1) says every person being a manager at any time during the financial year shall be jointly and severally liable for the payment of any amount due under the Act in respect of the company for the financial year, "if the amount cannot be recovered from the company".
Three features stand out.
- Timing: the test is being a manager "at any time during the financial year", so even a short period in office within the year is enough to bring the person within the sub-section.
- Condition: liability arises only if the amount "cannot be recovered from the company".
- Nature: it is joint and several, so each manager can be asked for the whole amount.
Section 35(2) gives the defence: the provisions of sub-section (1) shall not apply "if the manager proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation to the affairs of the company". The burden is on the manager to prove it. The Act does not list what counts as neglect, misfeasance or breach of duty, and this article adds no list.
Section 35(3) and (4): overriding effect and meaning
Section 35(3) says the provisions of the section shall prevail over anything to the contrary contained in the Companies Act, 2013. Section 35(4) says "manager" shall include a managing director, and both shall have the meaning respectively assigned to them in clause (53) and clause (54) of section 2 of the Companies Act, 2013. These are quoted as printed.
If you have been a manager or managing director of a company that has foreign income or assets which were not fully disclosed, the date range of your office and the company's records matter. A legal consultation can help you assess your position before any notice arrives.
Section 36(1): participants in an unincorporated body
Section 36(1) says every person, being a participant in an unincorporated body at any time during the financial year, or the representative assessee of the deceased participant, shall be jointly and severally liable, along with the unincorporated body, for payment of any amount payable by the unincorporated body under the Act, and all the provisions of the Act shall apply accordingly.
Two definitions in section 2 give the terms their meaning:
| Term | Meaning in section 2 |
|---|---|
| "participant" (clause 7) | (a) a partner in relation to a firm; or (b) a member in relation to an association of persons or body of individuals |
| "unincorporated body" (clause 13) | (a) a firm; (b) an association of persons; or (c) a body of individuals |
Our article on section 2 sets out both definitions. Note the difference from section 35: the sub-section here does not use the words "if the amount cannot be recovered" and says "along with the unincorporated body". The liability is therefore stated to run with the body's. The sub-section does extend to the representative assessee of a deceased participant, which the Act does not define in this section.
Section 36(2): the limited liability partnership
Section 36(2) says in the case of a limited liability partnership, the provisions of sub-section (1) shall not apply, "if the partner proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation to the affairs of the partnership".
This is the same defence as the manager's defence in section 35(2), but it appears only for a limited liability partnership. For other firms, associations of persons and bodies of individuals, the text of sub-section (2) gives no such defence. That is a point to note and not to widen.
Section 36(3): overriding effect
Section 36(3) says the provisions of the section shall prevail over anything to the contrary contained in the Limited Liability Partnership Act, 2008. It is quoted as printed.
How this sits with the rest of the Chapter
The general recovery steps are in sections 30 and 31. For a company that is being wound up, the liquidator's duties are in section 34. Sections 35 and 36 do not replace those; they add persons from whom payment can be asked.
An example
Greenfield Agro Private Limited has undisclosed foreign income, and the tax assessed cannot be recovered from the company. Ritu Verma was a manager of the company for part of the financial year in question. Under section 35(1), she is jointly and severally liable for the amount due for that year. She can avoid liability only by proving that non-recovery cannot be attributed to any neglect, misfeasance or breach of duty on her part. Separately, a firm of three partners faces a similar assessment. Each partner at any time during the financial year is jointly and severally liable with the firm under section 36(1). If the body were a limited liability partnership, a partner could take the defence in section 36(2).
Need help understanding your personal exposure?
If you were a manager, director-level officer or partner in an entity with foreign income or assets, the Act can reach you personally for the entity's dues. Our legal consultation team can help you review your role, the dates and the records that bear on the defence.
Key takeaways
- A manager at any time during the financial year is jointly and severally liable for the company's dues for that year if they cannot be recovered from the company.
- The manager's defence is to prove that non-recovery cannot be attributed to his neglect, misfeasance or breach of duty.
- "Manager" includes a managing director, with meanings from the Companies Act, 2013 as printed.
- Every participant in an unincorporated body, and the representative assessee of a deceased participant, is jointly and severally liable along with the body.
- A partner of a limited liability partnership has a defence of the same kind in section 36(2).
- Later Finance Act amendments to sections 35 and 36 must be checked before acting. The Companies Act, 2013 and the Limited Liability Partnership Act, 2008 are quoted as printed; check current law. The Act cites no section of the Income-tax Act, 1961 here; the corresponding provision of the current income-tax law should be checked where income-tax law is relevant.
Read next
- Section 34: recovery from a company in liquidation
- Section 32: modes of recovery of tax dues
- Section 2: definitions of assessee and undisclosed asset
- Black Money Act: undisclosed foreign income, an overview
Disclaimer: Based on the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as enacted and published in the Gazette of India on 27 May 2015, and on the Rules of 2015 as notified on 2 July 2015, as consulted on 2 October 2026. Later Finance Act amendments, amendment rules and the current income-tax law should be checked. This article is general information, not legal advice; check the official text before acting.