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Issues:
1. Interpretation of the Sick Textile Undertakings (Nationalisation) Act, 1974 regarding the acquisition of undertakings and liabilities. 2. Liability of the National Textile Corporation for tax dues of a company whose undertaking was acquired under the Act. Issue 1: Interpretation of the Sick Textile Undertakings (Nationalisation) Act, 1974 regarding the acquisition of undertakings and liabilities: The judgment by the High Court of MADRAS delves into the provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974. It clarifies that the Act only provided for the acquisition of sick textile undertakings and not the companies themselves. The Act distinguished between the "owner" and the "sick textile undertaking," with the owner being entitled to compensation as specified in the Act. Liabilities of the owner were to be enforced against them, not the Central Government or the National Textile Corporation. The Act outlined a process for claims against the owner, with priorities for the discharge of liabilities categorized into six classes. The judgment emphasizes that the company continues to exist even after the transfer of the undertaking to the Central Government and subsequent transferees. The court highlights the correct interpretation that the company was not taken over by the Central Government under the Act. Issue 2: Liability of the National Textile Corporation for tax dues of a company whose undertaking was acquired under the Act: The case involved a dispute over the liability of the National Textile Corporation for tax dues of a company whose undertaking was acquired under the Sick Textile Undertakings (Nationalisation) Act, 1974. The Income-tax Officer issued a notice asserting that the National Textile Corporation was liable to pay tax dues of the company. However, the High Court clarified that the liabilities enforceable against the National Textile Corporation were only those specified in the Act, and income tax arrears were not included. The court emphasized that the National Textile Corporation did not become the successor of the company for tax liability purposes. The judgment highlighted that the compensation payable to the company under the Act could not be increased by compelling the transferee to pay additional amounts. The court ruled in favor of the assessee, stating that the Income-tax Officer's actions were based on a misconception of power and a failure to understand the Act's provisions. In conclusion, the High Court of MADRAS provided a detailed analysis of the Sick Textile Undertakings (Nationalisation) Act, 1974, clarifying the acquisition of undertakings and liabilities under the Act. The judgment emphasized the distinction between the company and the undertaking, as well as the limited liabilities enforceable against the owner. Additionally, the court ruled in favor of the assessee regarding the liability of the National Textile Corporation for tax dues, highlighting the correct interpretation of the Act and the limitations on liabilities of transferees.
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