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TMI Blog1968 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... for the above purpose. The liquidator filed a report stating that though there was with him a sum of Rs. 1,47,483 in the account of this winding-up, it may not be possible to declare a dividend for the reason that large amounts would be required to pay the fees due to Central Government and also that the auditors had suggested that there was also a tax liability in respect of income arising out of the investments made in the course of winding up. As the liquidator appeared to entertain the opinion that it was a matter for doubt whether the company in liquidation could be held to be liable to tax in the light of the recent amendments of the Income-tax Act and the Companies Act, I asked him to take out a formal application for directions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amadhyani and Company, in their report dated 3rd March, 1966, observed that the above amounts of interest received by the liquidator would attract liability for income-tax and that therefore appropriate steps should be taken to settle the question of such liability in order to avoid the possibility of excess distribution of dividends. In my order dated 18th March, 1966, while accepting the report of the auditors, I had also made a direction that the liquidator should take out a separate application for necessary directions in regard to the question of liability to income-tax of the above amounts of interest. According to the tentative calculation made by the auditors, the tax liability is estimated at Rs. 93,745. In the course of the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r continues to be liable to income-tax as a person even after an order to wind up its affairs compulsorily by court is made and until it is finally dissolved. That the company in liquidation is a company for the purposes of the Income-tax Act and therefore assessable to tax, was also the view taken by the Allahabad High Court in the case reported in Commissioner of Income-tax v. Agra Spinning Mills Co. The argument addressed in that case in support of the view that a company in liquidation is not assessable to income-tax is more or less the same as the argument addressed before me in this case. That argument is that, according to the Income-tax Act, the person or the individual, on whom the responsibility of preparing, verifying and presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is assigned to it in the Companies Act, 1956, and because whereas clause (12) of section 2 of the Companies Act, 1913, which was in force when the Allahabad High Court decided the case, gave an inclusive definition of manager, clause (24) of section 2 of the Companies Act, 1956, expressly defines the term "manager" to mean an individual (not being the managing agent) who has the management of the whole or substantially the whole of the affairs of a company subject to the superintendence, control and direction of the board of directors. It is stated that the liquidator cannot at all come within the said definition. This refinement of the argument, though prima facie attractive, does not appear to me to be one of substance or one which af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other authority (subject to the exception contained in sub-section (4) of section 446 of the Companies Act) can take any proceedings or attach or otherwise reach any of the assets of the company without the leave of the winding-up court. In all matters, the winding-up court treats the liquidator as its special officer specially charged with the duty of representing the company and protecting its interests in winding up. In the light of the above principles, it is the duty of the court to see that all liabilities of a company are properly met in accordance with the provisions of the law and the special provisions in that behalf contained in the Companies Act. Liability to income-tax is also one of the liabilities which the court is expecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the principal officer is apparent from section 178 of the Income-tax Act, under the first sub-section whereof the liquidator is charged with the duty of giving notice to the appropriate Income-tax Officer of his appointment. Thereupon the Income-tax Officer is charged with the duty of notifying the liquidator the amount which, in the opinion of the Income-tax Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company. Taxes then due are also entitled to preference in the matter of payment under section 530 of the Companies Act, if they satisfy the conditions of the said section. At the same time, as the issue of any notice, whether under section 178 of the Income-tax Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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