2005 (3) TMI 460 - HC - Companies Law

Summary

Issues:
1. Whether section 446 of the Companies Act, 1956 or section 22 of Sick Industrial Companies (Special Provisions) Act, 1985 bars assessment or recovery of tax.

Analysis:

Contention No. 1:
The petitioners argued that the rejection of settlement applications under the 2001 Scheme was arbitrary, claiming that the deposit of the settlement amount within the specified time was not mandatory. However, the Court found that adherence to the time-limit was essential for availing the scheme's benefits. The scheme required depositing the amount within fifteen days of receipt, along with proof of withdrawal of appeals. The Court held that strict compliance with such conditions was necessary, citing a Supreme Court ruling on a similar matter. Consequently, the rejection of the settlement applications was deemed justified, and no interference was warranted.

Contention No. II:
Regarding the assessment and recovery of tax under section 22 of the 1985 Act or section 446 of the Companies Act, the Court referenced a Supreme Court decision that clarified the initiation of assessment proceedings against a company under liquidation. It was established that assessment proceedings could proceed without prior permission from the Company Judge. The Court dismissed the argument that no tax could be assessed due to protection under section 22 of the 1985 Act, emphasizing that once the BIFR rejected the reference, the protection ceased. The Court also highlighted the priority of tax payment under relevant Acts and clarified that recovery of tax required permission from the Company Judge or AIFR. The Court restrained the respondents from recovering tax without such permission. Additionally, the Court noted that the attachment and sale of a car had been withdrawn, rendering that issue moot. The Court also declined the argument that tax recovery was barred due to the petitioner being a 'relief undertaking' under a specific Act.

In conclusion, the Court ruled that while taxing authorities could initiate tax assessment, recovery required permission from the Company Judge or AIFR if an appeal was pending. The writ petition was disposed of with no costs awarded, considering the case's circumstances.