1991 (7) TMI 257 - HC - Companies Law

Summary

Issues: Declaration of expenses incurred by the liquidator as allowable expenses in the winding up administration of the company.

Analysis:
The judgment pertains to the expenses incurred by the liquidator of a company in the winding up administration. The liquidator, in this case, had incurred various expenses for the proper winding up of the company, including engaging the services of a Chartered Accountant. The Income-tax Officer had allowed only 10% of the interest income as expenses admissible for certain assessment years, leading to disputes and appeals. The Commissioner of Income-tax (Appeals) and the Tribunal had granted relief in some instances, but the Income-tax Officer continued to allow only 10% of the interest income as expenses admissible in subsequent years, causing the liquidator to incur significant expenses unnecessarily.

The official liquidator, who becomes the liquidator of a company under the Companies Act upon a court order for winding up, is subject to the control of the court. The liquidator's major income is the interest earned on investments, and he is required to comply with various court orders for realizing debts, engaging counsel, and other necessary activities. The liquidator incurs expenses such as audit fees, legal fees, staff salaries, printing charges, advertisement costs, and various miscellaneous expenses in the administration of winding up all companies under his charge. These expenses are uniformly met by the official liquidator as per court orders.

Given the circumstances and the unnecessary expenses incurred by the liquidator to establish these expenses as allowable in income tax assessments, the court declared that all expenses incurred by the liquidator in respect of the company are allowable expenses in the winding up administration. The declared expenses include a wide range of costs such as audit fees, legal fees, rent, printing charges, and other miscellaneous expenses. The court emphasized that the liquidator may file separate reports and obtain separate orders for each company if necessary, ensuring clarity and specificity in the treatment of expenses for each company under liquidation.