1990 (10) TMI 24 - HC - Income Tax

Issues Involved:
1. Liability for income-tax arrears and interest for the assessment year 1974-75.
2. Applicability of the Kerala Relief Undertakings (Special Provisions) Act, 1961, and its amendments.
3. Impact of the Super Clays and Minerals Mining Company (Private) Limited (Acquisition of Undertakings) Act, 1983.
4. Responsibility of the petitioner and the Government of Kerala regarding the tax dues.
5. Validity of the Tax Recovery Officer's coercive measures.

Detailed Analysis:

1. Liability for Income-Tax Arrears and Interest for the Assessment Year 1974-75:
The primary issue revolves around the liability for income-tax arrears amounting to Rs. 42,263 and the accrued interest under section 220(2) of the Income-tax Act, totaling Rs. 1,04,400. The petitioner contended that the liability should be borne by the Government of Kerala as per section 7(4) of the Acquisition Act, while the Government argued that it is only responsible for unspecified future liabilities and not past liabilities.

2. Applicability of the Kerala Relief Undertakings (Special Provisions) Act, 1961, and Its Amendments:
The Kerala Relief Undertakings Act provided a moratorium on the recovery of certain liabilities during the period of notification, which could be extended up to a maximum of ten years. However, the Income-tax Act was not included in the Schedule to the Relief Undertakings Act, and thus, the statutory interest under section 220(2) continued to accrue. The protection under the Relief Undertakings Act expired before the issuance of exhibit P-12 on March 8, 1987, making the petitioner's reliance on this Act untenable.

3. Impact of the Super Clays and Minerals Mining Company (Private) Limited (Acquisition of Undertakings) Act, 1983:
The Acquisition Act facilitated the transfer and vesting of the fourth respondent's undertakings to the Government and subsequently to the petitioner. Section 6 of the Act explicitly stated that all assets and liabilities of the company would vest in the Government company. The petitioner's argument that the Government should bear the liability under section 7(4) was dismissed as the liabilities, including tax dues, vested in the petitioner as the successor-in-interest.

4. Responsibility of the Petitioner and the Government of Kerala Regarding the Tax Dues:
The petitioner and the Government of Kerala engaged in prolonged correspondence, each attempting to shift the responsibility for the tax dues. The court found that both parties overlooked the provisions of section 6 of the Acquisition Act, which clearly vested the liabilities in the Government company, i.e., the petitioner. The Government's stance that it was not liable for past liabilities was upheld, as the tax dues were not specified in the audited balance sheet as on December 31, 1975.

5. Validity of the Tax Recovery Officer's Coercive Measures:
The Tax Recovery Officer's issuance of exhibit P-12, threatening coercive measures to recover the tax arrears, was deemed justified. The court concluded that the petitioner, as the successor-in-interest, was liable to pay the income-tax arrears and the accrued interest. The leniency shown by the Income-tax Department in not taking immediate coercive steps was noted, but the petitioner's obligation to discharge the liability was affirmed.

Conclusion:
The original petition was dismissed as devoid of merit. The petitioner was held liable for the income-tax arrears and interest, and the Tax Recovery Officer's actions were validated. The court emphasized that statutory liabilities could not be evaded and that the petitioner, as the successor-in-interest, was bound to discharge the tax dues. Respondents Nos. 1 to 3 were awarded costs, while the fourth respondent bore its own costs. The advocate's fee was fixed at Rs. 1,500.

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