1986 (10) TMI 31 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 220(1) of the Income-tax Act, 1961 in the case of a company in liquidation.
2. Charging of interest under section 220(2) of the Income-tax Act, 1961 for an assessee-company in liquidation.

Analysis:

The case involved the interpretation of provisions of the Income-tax Act, 1961 regarding the applicability of section 220(1) and section 220(2) in the context of a company undergoing liquidation. The assessee-company, M/s. Golcha Properties (Private) Ltd., had gone into liquidation, and the official liquidator contended that interest under section 220(2) was not chargeable post the winding-up order under section 446(1) of the Companies Act, 1956, read with rule 179 of the Companies (Court) Rules, 1959. The Income-tax Officer disagreed, asserting that the Companies Act provisions did not bar the charging of interest under section 220(2) as it was not a measure for recovery of tax demand requiring court approval.

Upon appeal, the Appellate Assistant Commissioner upheld the Income-tax Officer's decision, prompting the official liquidator to appeal to the Income-tax Appellate Tribunal. The Tribunal, relying on Supreme Court precedents, determined that the Income-tax Officer's jurisdiction extended only up to quantifying the tax demand, post which the company court could assess the correctness of the demand. The Tribunal emphasized that specific Companies Act provisions took precedence over general Income-tax Act provisions in such scenarios, thereby setting aside the lower authorities' orders.

The Tribunal's decision was challenged by the Department, leading to the High Court's consideration of the matter. The court, noting the absence of contrary Supreme Court decisions, affirmed the Tribunal's reliance on the earlier judgments and rejected the Revenue's arguments. The court held that the issues were settled by the Supreme Court decisions cited, thereby answering the questions of law in favor of the assessee-company and against the Revenue, without awarding any costs.

In conclusion, the High Court clarified the application of sections 220(1) and 220(2) of the Income-tax Act, 1961 concerning companies in liquidation, emphasizing the precedence of specific Companies Act provisions in such circumstances. The judgment underscored the limited jurisdiction of the Income-tax Officer post-demand notice service on the official liquidator and upheld the Tribunal's decision based on established legal principles.