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TMI Blog1973 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... as incorporated as a private limited company under the provisions of the Indian Companies Act, 1913. The company was carrying on its business for a couple of years and, thereafter, it is said that it landed in difficulties and it stopped its business. For the assessment year 1957-58, the company was assessed to income-tax under the provisions of the Indian Income-tax Act, 1922, on a total income of Rs. 2,933 and the tax assessed thereon worked out to Rs. 1,510.50. With a little assets remaining with the company, a portion of the tax was paid and the balance of Rs. 1,336 remained outstanding. The Income-tax Officer (Collection), Hubli, who is the respondent before me, finding that the arrears of tax could not be recovered from the assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmencement of this Act, and any tax assessed on the company, whether before or in the course of or after its liquidation, in respect of any income of any previous year cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company". The requirements of the said section are: (1) that the company should be a private limited company, (2) that the company should be wound up after the commencement of the Act, i.e. , on April 1, 1962, and (3) that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the register under section 560(5) of the Companies Act, and, therefore, section 179 of the Act was inapplicable to hold the petitioner liable for the payment of the tax due from the company. The question narrows down to this. Whether the tax due from a private limited company which was struck off under section 560(5) of the Companies Act could be recovered from its past director under section 179 of the Act ? To understand what exactly is the meaning of the expression "wound up", I have necessarily to refer to the provisions of the Companies Act. Section 425 of the said Act states that the winding-up of a company may be either, ( a ) by the court; or ( b ) voluntary; or ( c ) subject to the supervision of the court. It is a process b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny shall be deemed to have continued in existence as if its name had not been struck off. I have already stated that the winding-up is a process by which the assets of the company are realised and its liabilities are paid in accordance with the provisions of the Companies Act. But, if the name of a company is struck off the register, its undisposed of property is not appropriated towards its liabilities. Nobody would claim that property. It vests in the Crown as bona vacantia subject to its rights to disclaim. (See The Principles of Modern Company Law, 3rd edition, by L.C.B. Gower, page 652). A reference may be made to the decision of the Calcutta High Court in In re U. N. Mandal's Estate ( P. ) Ltd. [1960] 30 Comp. Cas. 172; A.I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed to the expression 'wound up' is the meaning which is given to that expression in the Indian Companies Act. The provisions of section 179 are, therefore, limited only to those private companies against which proceedings for winding-up have been taken and have been wound up after the commencement of the 1961 Act. The expression 'wound up' cannot be liberally interpreted so as to include also companies dissolved as having become defunct without being wound up". I, therefore, hold that the company in question was not wound up and the petitioner cannot be held liable under the provisions of section 179 of the Act. The action taken by the respondent for recovery of the tax due from the company was illegal and without the authority of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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