9911796707
TMI Blog2002 (10) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... and Chemicals Limited. For the convenient sake we may refer to Report No. 58 in connection with M/s. KTC Tyres (India) Limited. Statement and reply statement has been filed by the contesting parties in that case. In the report Official Liquidator prayed for the following reliefs. ( i )take this report on record; ( ii )direct that no income-tax is payable from the sale proceeds as capital gain tax, advance tax instalments and additional tax, if any, on the sale of the charged assets of the company in liquidation until the dues of the secured creditors and workmen creditors are paid in full; ( iii )declare that no advance tax is payable in respect of this company in liquidation for the assessment year 1997-98 and subsequent assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e properties of the Company, a sum of Rs. 1,78,37,000 was received by the Official Liquidator. The stand of the Official Liquidator is that payment of income-tax, capital gain tax, advance tax and additional tax is to be considered only after satisfying the dues of the secured creditors and workmen. 4. A statement has been preferred on behalf of the Income-tax Department. In the return submitted by the Official Liquidator for the assess- ment year 1997-98 on 25-11-1997 a note was appended which is extracted below : "Note :- In the instant case, the dues of the secured creditors and workmen are yet to be settled. Hence, in the light of the order dated 25-9-1990 on Report No. 120 in C.P. No. 7 of 1979 and 4 of 1980 in the matter of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uidation. Counsel made reference to the decision of this Court in ITO v. Official Liquidator, Swaraj Motors (P.) Ltd. [1978] 48 Comp. Cas. 11 . Learned Company Judge found favour with the contention raised on behalf of the Department and held as follows : "To me, it appears that capital gains is part of the incidence of the sale effected by the Official Liquidator of the property belonging to the company just like a liability for stamp duty, registration charges or the like, it is not a debt due by the company as on the date of commencement of winding up or the order for winding up. ****** But section 529A only puts the claims of the workmen pari passu with the secured creditors. It can only be as regards the assets that are ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase ( supra ). What was raised before the Apex Court was whether order passed under section 178 of the Income-tax Act would have preference over rights of unsecured creditors. The Apex Court held that Income-tax Department is to be treated as secured creditor and would get priority in the matter of payment. Imperial Chit Funds (P.) Ltd. s case ( supra ), is an authority for the proposition that between unsecured creditors the claim of tax due under section 178 of the Income-tax Act would have preference over all other claims of unsecured creditors. 6. We are of the view, Apex Court in Imperial Chit Funds (P.) Ltd. s case ( supra ) as well as the decision of the Division Bench in Swaraj Motors (P.) Ltd. s case ( supra ) had no occa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause whittles down the priority of even the crown debts. It is the general concern for the interest of the workmen that is saved by the Apex Court in the decision in Workmen of Rohtas Industries Ltd. v. Rohtas Industries Ltd. [1987] 62 Comp. Cas. 872 . The Apex Court held that subsistence and living of the workers is of paramount importance and has to rank with highest priority. Their wages and emoluments upto the date of closure of the company will rank in priority over the secured creditors. In Giovanola Binny Ltd. s case ( supra ) this court has held that tax on capital gains cannot be claimed in preference to dues of Bank and claims of workmen. 7. Counsel for the Income-tax Department submitted that the tax demanded is cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to mean any pecuniary liability. In CWT v. Ahmed Tea Co. (P.) Ltd. [1963] 48 ITR 943 (Assam), the court held any liability to pay income-tax and the assessee has set apart certain amount thought to be necessary for discharging the tax liability, the same has been ascertained it cannot be said that the amount is not a debt. Therefore, the tax liability may also come within the expression "debt" under section 529A. The Apex Court in Imperial Chit Fund s case ( supra ), or the Division Bench in Swaraj Motor s case ( supra ) had no occasion to examine the scope of section 529A which was introduced by the legislature by employing a non obstante clause which overrides other provisions under the Companies Act as well as under other le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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