2004 (7) TMI 76 - HC - Wealth-tax

This application has been filed by the official liquidator to direct the respondent to waive the penalty imposed by them on wealth-tax under section 31(2) of the Wealth-tax Act - The official liquidator has adjudicated the claims of the secured creditors which caused delay in paying the wealth-tax to the authorities. The delay in payment of tax on which interest was levied is not due to the fault of the company. Moreover no details were furnished by the tax authorities to show any demand is made. This court is vested with the powers to waive the claims like interest and penal interest in a fit and proper case. This is a fit and proper case to waive the interest demanded by the authorities. Hence I hold that the claim of the respondent in respect of interest is unsustainable in law.

Issues:
1. Waiver of penalty imposed on wealth-tax under section 31(2) of the Wealth-tax Act.
2. Application filed by the official liquidator for directing the respondent to waive the penalty.
3. Interpretation of relevant provisions in the Wealth-tax Act (27 of 1957) - sections 30 and 31.
4. Comparison with provisions in the Income-tax Act - sections 156 and 220.
5. Authority of the court to waive interest and penal interest under section 446(2)(b) of the Companies Act, 1956.
6. Adjudication of claims by the official liquidator and delay in payment of wealth-tax.
7. Liability of the company for payment of taxes and interest.

Analysis:

The judgment revolves around the application filed by the official liquidator seeking the waiver of the penalty imposed on wealth-tax under section 31(2) of the Wealth-tax Act. The court examined the relevant provisions of the Wealth-tax Act, specifically sections 30 and 31, which outline the procedure for the payment of tax, interest, and penalties. It was highlighted that if the amount specified in a notice of demand is not paid within the stipulated period, the assessee becomes liable to pay simple interest. However, under section 31(2A), the Chief Commissioner or Commissioner may reduce or waive the interest payable if certain conditions are met, such as genuine hardship to the assessee and circumstances beyond the assessee's control.

Moreover, the judgment delved into the comparison between the provisions of the Wealth-tax Act and the Income-tax Act, particularly sections 156 and 220, which are noted to be identical in terms of the payment and default consequences. The court also referred to its previous order related to the waiver of interest under the Income-tax Act, emphasizing the authority of the court to waive interest and penal interest under section 446(2)(b) of the Companies Act, 1956, based on specific circumstances and hardship faced by the assessee.

Furthermore, the judgment discussed the adjudication of claims by the official liquidator, emphasizing that the delay in paying wealth-tax was due to the adjudication of claims of secured creditors, not the fault of the company. The court asserted that it had the power to waive interest in a fit and proper case, and in this instance, it deemed the waiver of interest demanded by the authorities as justified. However, the court directed the official liquidator to pay the tax component amounting to Rs. 68,65,681 within a specified period, holding the company liable for the tax payment despite waiving the interest component.

In conclusion, the court ordered the official liquidator to pay the wealth-tax liability within two weeks and closed the application without costs, ensuring the fulfillment of tax obligations while waiving the interest component based on the circumstances and legal provisions discussed in the judgment.

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