1983 (9) TMI 30 - HC - Income Tax

Summary

Issues:
1. Interpretation of the rights of a petitioner-Corporation under the Sick Textile Undertakings (Nationalisation) Act, 1974 regarding the refund of income tax paid by a partnership firm.
2. Determination of whether the petitioner-Corporation has a statutory right to claim the refund from the Income-tax Department.
3. Analysis of the obligation of the Income-tax Department under section 240 of the Income Tax Act, 1961 in relation to refunding tax amounts.

Analysis:
1. The petitioner-Corporation, a subsidiary of the National Textile Corporation Limited, claimed entitlement to a refund of income tax paid by a partnership firm, "Kalyanmal Mills Tent Factory," which was part of a sick textile undertaking, "Kalyanmal Mills," vested in the petitioner under the Sick Textile Undertakings (Nationalisation) Act, 1974. The petitioner contended that the refund should be directed to them as the successor of the undertaking. However, the court held that the property of the undertaking vested in the petitioner, not the entire property of the former owner. The court refrained from deciding whether the firm was part of the undertaking, leaving it for appropriate proceedings to determine.

2. The court emphasized that the statutory duty of the Income-tax Department, under section 240 of the Income Tax Act, 1961, is to refund tax amounts to the assessee who paid the tax and is found not liable to pay after an appeal. The court clarified that no provision mandates the department to refund to the petitioner merely based on a claim to the property of the assessee-firm. The petitioner was advised to pursue recovery through legal means if the firm's property was rightfully theirs, as provided under section 32 of the Sick Textile Undertakings (Nationalisation) Act, 1974.

3. Ultimately, the court dismissed the petition under Article 226 of the Constitution, deeming it misconceived. It ruled that the Income-tax Department's duty is limited to refunding tax to the assessee who paid it, and no legal basis was presented for directing the department to refund to the petitioner. The court highlighted that the petitioner's remedy lies in establishing their right to the firm's property through appropriate legal proceedings rather than seeking relief through a writ of mandamus. The parties were directed to bear their own costs, and any security deposit was to be refunded to the petitioner.