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TMI Blog1962 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer, Bellary, who was the appropriate assessing authority in respect of the said firm, issued to the company on nth February, 1953, a notice under the provisions of section 46(5A) of the Indian Income-tax Act, 1922, requiring the company to pay to the officer the money due by it to the defaulting assessee. In reply to the notice, the company in its letter dated 20th February, 1953 after acknowledging receipt of the said notice, stated as follows : The above firm has done some contract work for us in the years 1947-48-49 and have obtained payment in respect of the works executed on interim bills by way of cash and material advances. Only a sum of Rs. 14,503-12-9 is due to them according to our books. But they have not signed and returned to us the final bills prepared by our engineer. This amount becomes payable to them only on their signing, accepting and delivering the bills to us. Till such time we are keeping this amount in suspense under restraint. We have asked the party to expedite sending of the bill." It also appears from the same reply that a similar notice had been received by the company from the II-Additional Income-tax Officer, Urban Circle, Bangalore. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al reasons for declining to accept the claim. The first of them is that the company did not accept any liability in favour of the firm of builders and that no mention of the continued existence of any such liability has been made in the statement of affairs filed by the company. The second ground is that the claim, if any, had become barred by limitation. The learned counsel for the applicant. Income-tax Officer, states that neither of these grounds is sustainable either on facts or in law. In its reply dated 20th February, 1953, to the notice under section 46(5A) of the Income-tax Act, the company has stated in unmistakable terms that a sum of Rs. 14,503-12-9 was due to the firm of builders according to the books of the company. The further statement in that letter that the amount becomes payable to the builders only upon the latter signing and accepting the bills relating to the works does not amount to a denial of the existence of liability. That is made further clear by the statement in the same letter to the effect that till such time (that is to say, until the builders sign and accept the bills), the company would keep the amount " in suspense under restraint ". The origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e South India Builders must have been balanced by a contra entry of the same amount to the debit of one of the asset accounts, viz ., the "building account". Even when that entry was reversed as stated above, it is shown as an unclaimed liability. That means not that the liability never existed but that the person in whose favour that liability existed had not chosen to make a claim in respect of it. In view of this clear effect of the books, the statement in the company's reply dated 20th February, 1953, to the Income-tax Officer to the effect that a sum of Rs. 14,503-12-9 was due to the builders according to the books of the company accurately represents the true state of affairs. It has been argued by the liquidator that the company's letter to the Income-tax Officer dated 28th December, 1956, the relevant portion of which I have already extracted, must be read as a disclaimer of liability by the company within the meaning of the last paragraph of section 46(5A) of the Income-tax Act, according to which where a person served with notice under that section objects to it on the ground that the sum demanded or any part of it was not due to the assessee, nothing contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, the article of limitation governing that claim would be not article 56, but article 140 of the First Schedule of the Limitation Act. According to the latter article, a suit by or on behalf of the Central Government is governed by a period of 60 years counted from the point of time from which limitation would have had to be computed in respect of a like suit by a private person. I think all these contentions on behalf of the officer are sound and should be accepted. Apart from the principles stated in Sesha Ayyar v. Tinnavelly Sarangapani Sugar Mills Company Limited [1907] ILR. 30 Mad. 533 , viz ., that a person who has attached a decree against a company must be allowed to prove in the name of the holder of that decree the debt due under that decree in liquidation as a creditor of the company, the effect of section 46(5A) of the Income-tax Act itself is sufficient to support the contention of the Income-tax Officer that by virtue of the notice under that section he has an enforceable claim against the company. I also agree that that claim being one by or on behalf of the Central Government, the department can claim the benefit of longer period of limitation p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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