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TMI Blog1953 (11) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 18A of the Income-tax Act. There is also a claim for compulsory deposit. No orders are passed in this application with reference to compulsory deposits as it is stated that the Government by its notification directed refund of the same, and it is open to the liquidators to apply for its refund. The dispute now confines itself to a sum of Rs. 8,176-13-0, which is the advance tax payable for Income-tax year 1949-1950. The demand under section 18A was issued on the 5th October, 1948. The company was wound up by an order of court dated the 12th September, 1949. Under Section 230 ( a ) of the Indian Companies Act, all revenue, taxes, cesses and rates, whether payable to the Crown or to a local authority, due from the company, and having become due and payable within twelve months before the date of the winding up order, should be paid in priority to all other debts. The tax became due and payable on the 15th March, 1949. Though a larger amount was demanded under section 18A on the 6th October, 1948, it was ascertained in August, 1950, that the actual amount of tax payable was Rs. 8,176-13-0 and demand for payment of the same was also made. It is contended on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee does not pay on the specific dates any instalment of tax that he is required to pay under sub-section (1) and does not, before the date on which any such instalment as is not paid becomes due, send under sub-section (2) an estimate or a revised estimate of the tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments." It is contended that advance payment is not income-tax because under section 3, income-tax is to be charged at the rate or rates fixed by the Finance Act, and if the Finance Act, which is to apply for the year, could not have been passed by then, there could be no rate or rates at which tax could be charged and that the amount demanded is therefore not income-tax but only a deposit. In support of this contention, reference is made to the words in section 18A(1)( a ) "that the Income-tax Officer may, by order in writing, require an assessee to pay quarterly to the credit of the Central Government." The use of the words "to the credit of the Central Government" is relied upon to show that the amount is demanded as deposit, and not as tax, much less as income-tax. Further, since interest is provided for on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest, a notice of demand in the prescribed form specifying the sum so payable." The tax becomes payable as' soon as a notice of demand is made under section 29 as provided for under section 45 of the Act. Such a notice of demand has been given in this case and therefore the amount has become payable. By reason of the assessee not having paid the advance tax as per the notice of demand under section 29, he must be deemed to be an assessee in default under clause (10) of section 18A of the Act and the Income-tax Officer can therefore proceed to recover the tax under section 46 (2) by forwarding to the Collector a certificate. Therefore the complete process of levy, demand and enforcement has been provided in respect of advance income-tax. It is therefore a tax that has become due and payable. The provision for enforcement of payment being there, it cannot be said that it is only a refundable deposit and not a tax lawfully due and payable. The right to levy a penalty further supports th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable within the twelve months next before that date. Sub-section (5) specifies the material date in the case of a company ordered to be wound up compulsorily, which had not previously commenced to be wound up voluntarily, as the date of the winding up order; and it is common ground that the company in this case is one such company. The material date is, therefore, 12th September, 1949. As already mentioned, the notice of demand under section 18A of the Income-tax Act was issued on 6th October, 1948, that is, within the twelve months next before the date of the winding up order. Mr. Vidyasankar, learned counsel for the appellants, contended that the State was not entitled to priority because advance income-tax demanded under section 18A of the Income-tax Act does not fall within the category of taxes specified in section 230 (1) ( a ) because (1) it is not a tax and (2) it is not due as income-tax from the company at the date of the winding up order and did not become due and payable as income-tax within the prescribed period. It is impossible to accept the contention of Mr. Vidyasankar that the amount demanded as advance income-tax under section 18A of the Income-tax Act is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (2nd Edition) at page 599: "It has been noted above that under this Act the subject of charge is the income of the previous year and not the income of the assessment year ; in other words, the tax is assessed and paid in the next succeeding year upon the results of the year before. Secondly, there is no liability to tax until the annual Finance Act is passed charging the income of the previous year. This section contrives to reconcile the principle of advance payment of tax with the scheme of the Act which is to tax the income of the previous year. The basis of the section is the principle of 'pay as you earn', i.e., paying tax by instalments in respect of the income of the very year in which the tax is paid. But the section cannot directly levy any tax on the income of the assessment year, because under the charging sections which are sections 3 and 65 income-tax and super-tax respectively can be levied at the rates specified in the annual Finance Act only in respect of the income of the previous year. So sub-section (1) of this section provides for the payment of tax in respect of the income-tax of 'the latest previous year', while under sub-section (11) the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up by an order made on 18th July, 1950. At the time of the settlement of the list of creditors by the liquidator, the Commercial Tax Officer demanded payment of a sum of Rs. 760-10-9 as arrears of sales tax due from the company for the four quarters ending on 31st March, 1948. The notice of demand was issued on 17th May, 1950. Prior to the winding up proceeding, the company had filed returns on 2nd April, 1948, and 7th July, 1948, for sales tax for four quarters from 1st April, 1947. to 31st March, 1948, and paid the money as per the returns filed by them. The returns were, however, found by the assessing authorities to be insufficient, The company was assessed thereafter under section 11 of the Bengal Sales Tax Act, and notice was issued for the balance due after crediting the amounts paid with the returns. The question was whether the sales tax authorities were entitled to a preferential payment of this amount under section 230(1)( a ) of the Companies Act. It was held that the said amount became due and payable on 17th May, 1960, when the notice of demand was served and therefore the State was entitled to preferential payment under section 230(1)( a ) of the Indian Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified and notified to the assessee with a demand for payment and that was the effect of the Sales Tax Act as much as of the Income-tax Act. Ordinarily, a dealer pays along with the return the sales tax due according to the return. In that case, there is no demand at all by the sales tax authorities until the final assessment is made. If a balance is still due, then there is a demand for such balance which becomes due and payable. There may be, however, a possible contingency that the tax or the entire tax due according to a return is itself not paid. The learned Chief Justice was inclined to the view that the balance of tax so due might fall within section 230(1)( a ) of the Indian Companies Act, but that was not the case before them. We do not think that either the decision or the observations in this case can be of any assistance to the appellants. There is no substantial difference between the scheme of the Sales Tax Act and that of the Income-tax Act. Under the Sales Tax Act, the dealer is expected to pay the tax calculated according to the returns along with the returns. But there is no demand as such ever made by the sales tax authorities until a final assessment is made und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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