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Issues:
1. Interpretation of section 46(5A) of the Income-tax Act, 1922 regarding the liability of a company for income tax demands. 2. Determining the legal implications of a company changing its name under section 11(5) of the Indian Companies Act, 1913 on its income tax liabilities. Analysis: The judgment by the High Court of Calcutta, delivered by D. Basu and A. K. Basu, JJ., dealt with the issue of the liability of a company for income tax demands under section 46(5A) of the Income-tax Act, 1922. The case involved the Meghlibundh Tea Company, which changed its name to the Economic Investment Corporation Ltd. The Income-tax Officer made an assessment for a previous period on the Meghlibundh Tea Company, even after the name change. The question raised was whether the new company, Economic Investment Corporation Ltd., could be held liable for the tax demand of the old company. The appellant contended that as a successor company, it could not be proceeded against without separate assessment proceedings. However, the court clarified that the notice under section 46(5A) was to recover the tax from the bank holding money for the old company, not as a successor liability. The judgment delved into the legal implications of a company changing its name under section 11(5) of the Companies Act, 1913. It highlighted that the change in name does not alter the company's rights or obligations, and all legal proceedings continue by or against the company under its new name. The court emphasized that the assets and liabilities of the old company pass to the new one, and there is no change in the legal status or entity. Therefore, the new company, despite the name change, remains liable for the tax obligations of the old company. The court rejected the argument that the Income-tax Officer's failure to update records with the new name absolved the new company from liability, emphasizing that the substantive obligation to pay tax remains unchanged. Furthermore, the judgment criticized the carelessness of the Income-tax Officer for not updating records despite being informed of the name change. The court highlighted the importance of proper administration within the income tax department to prevent such errors. Despite dismissing the appeal, the court refrained from awarding costs due to the circumstances of the case. The judgment underscored the legal continuity of a company despite a change in name and upheld the liability of the new company for the tax obligations of the old company, emphasizing the need for diligence in tax administration.
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