9911796707
TMI Blog1985 (4) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) (hereinafter referred to as the company), was assessed to income-tax for the years 1975-76 and 1976-77, allowing permissible deduction to the extent only of Rs. 7,500 for each year as against the claim of the official liquidator for much larger deductions. In appeal by the official liquidator, the AAC allowed the deductions claimed and the taxable income of the company in liquidation was reduced considerably. In further appeal, at the instance of the Department, the Income-tax Appellate Tribunal set aside the orders of the AAC and allowed deduction to the extent of Rs. 10,000 for each year. Fresh demands were made by the ITO for payment of the tax assessed in pursuance of the orders of the Tribunal and the entire tax demanded was pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose." Interest accrues under sub-section (2) of section 220 of the I.T. Act on failure of the assessee to pay the tax demanded within the time specified in the notice of demand. In Union of India v. India Fisheries ( P. ) Ltd. [1965] 35 Comp. Cas. 669 ; 57 ITR 331, the Supreme Court held that once the claim of the Income-tax Department has to be proved and is proved in liquidation proceedings, it cannot, by exercising its rights under section 49E of the Indian I.T. Act, 1922, get priority over the other unsecured creditors. It was further held that section 49E of the Indian I.T. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation of his security, it was held that a secured creditor is also bound under section 171 of the Companies Act, 1913, to obtain leave of the winding-up court even though such leave would be automatically granted to him. Considering the decisions in Shiromani Sugar Mills Ltd.'s case [1946] 16 Comp. Cas. 71 ; 14 ITR 248 (FC) and Ranganathan's case [1955] 2 SCR 374; 25 Comp. Cas. 344 (SC), the Supreme Court in Kondaskar v. Deshpande [1972] 42 Comp. Cas. 168 , 175 ; 83 ITR 685 stated thus at page 693 : "These two decisions in our opinion do not lay down that assessment proceedings under the Income-tax Act should be held to be within the contemplation of section 171 of the Indian Companies Act, 1913." In the aforesaid decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income-tax. It would lead to anomalous consequences if the winding-up court were to be held empowered to transfer the assessment proceedings to itself and assess the company to income-tax. The argument on behalf of the appellant by Sri Desai is that the winding-up court is empowered in its discretion to decline to transfer the assessment proceedings in a given case but the power on the plain language of section 446 of the Act must be held to vest in that court to be exercised only if considered expedient. We are not impressed by this argument. The language of section 446 must be so construed as to eliminate such startling consequences as investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage, the winding-up court can fully safeguard the interests of the company and its creditors under the Act. Incidentally, it may be pointed out that at the bar no English decision was brought to our notice under which assessment proceedings were held to be controlled by the winding-up court. On the view that we have taken, the decisions in the cases of Seth Spinning Mills Ltd. ( In liquidation ) [1962] 32 Comp. Cas. 801 ; 46 ITR 193 (Punj.) and the Mysore Spun Silk Mills Ltd. ( In liquidation ) [1968] 38 Comp. Cas. 272 ; 68 ITR 295 (Mys.), do not seem to lay down the correct rule of law that the Income-tax Officers must obtain leave of the winding-up court for commencing or continuing assessment or reassessment proceedings." In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted as laying down the correct law. It should also be borne in mind that the decision of the Punjab High Court in Seth Spinning Mills' case [1962] 32 Comp. Cas. 801; 46 ITR 193 related to penalty proceedings and when the Supreme Court overruled the said decision, it is clear that proceedings for assessment of penalty are also outside the scope of section 446(1) of the Companies Act. We, therefore, hold there is no need of a prior sanction of the winding-up court for assessment of interest under section 220(2) of the I.T. Act. The question as to whether interest for delayed payment of tax should also be paid out of the funds of the company in liquidation and if so to what extent such payments can be made are all matters for the winding ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
