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TMI Blog1953 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to be paid in priority to all other debts, all revenue, taxes, cesses and rates due from the company at the date specified in sub-section (5) of Section 230 and having become due and payable within the twelve months next before that date. Sub-section (5) specifies the material date in the case of a company ordered to be wound up compulsorily, which had not previously commenced to be wound up voluntarily, as the date of the winding up order; and it is common ground that the company in this case is one such company. The material date is, therefore, 12th September, 1949. As already mentioned, the notice of demand under Section 18A of the Income-tax Act was issued on 5th October, 1948, that is, within the twelve months next before the date of the winding up ORDER Mr. Vidyasankar, learned counsel for the appellants, contended that the State was not entitled to priority because advance income-tax demanded under Section 18A of the Income-tax Act does not fall within the category of taxes specified in Section 230(1)(a) because (1) it is not a tax and (2) it is not due as income-tax from the company at the date of the winding up order and did not become due and payable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is not, properly speaking, income-tax, because there is no assessment and there is no provision for an appeal. Reliance was placed by learned counsel for the appellants on the following passage in Sir Jamshedji B. Kanga's the Law and Practice of Income-tax (2nd Edition) at page 599:- It has been noted above that under this Act the subject of charge is the income of the previous year and not the income of the assessment year; in other words, the tax is assessed and paid in the next succeeding year upon the results of the year before. Secondly, there is no liability to tax until the annual Finance Act is passed charging the income of the previous year. This section contrives to reconcile the principle of advance payment of tax with the scheme of the Act which is to tax the income of the previous year. The basis of the section is the principle of 'pay as you earn', i.e., paying tax by instalments in respect of the income of the very year in which the tax is paid. But the section cannot directly levy any tax on the income of the assessment year, because under the charging sections which are Sections 3 and 55 income-tax and super-tax respectively can be levied at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e [1953] 4 S.T.C. 271. On a close analysis of the decision, we are of opinion that far from the decision supporting the appellants, its ratio decidendi is definitely against the contention of the appellants. The material facts in that case were as follows: A private limited company was directed to be wound up by an order made on 18th July, 1950. At the time of the settlement of the list of creditors by the liquidator, the Commercial Tax Officer demanded payment of a sum of ₹ 760-10-9 as arrears of sales tax due from the company for the four quarters ending on 31st March, 1948. The notice of demand was issued on 17th May, 1950. Prior to the winding up proceedings, the company had filed returns on 2nd April, 1948, and 7th July, 1948, for sales tax for four quarters from 1st April, 1947, to 31st March, 1948, and paid the money as per the returns filed by them. The returns were however, found by the assessing authorities to be insufficient. The company was assessed thereafter under Section 11 of the Bengal Sales Tax Act, and notice was issued for the balance due after crediting the amounts paid with the returns. The question was whether the sales tax authorities were entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at respect, quite rightly. The learned Judges repelled the contention that the moment a return was made, the tax calculated on the material furnished by the return became due and payable, Chakravartti, C.J., observed that for the purposes of Section 230(1)(a) a tax is due and payable only when it has been ascertained, quantified and notified to the assessee with a demand for payment and that was the effect of the Sales Tax Act as much as of the Income-tax Act. Ordinarily, a dealer pays along with the return the sales tax due according to the return. In that has, there is no demand at all by the sales tax authorities until the final assessment is made. If a balance is still due, then there is a demand for such balance which becomes due and payable. There may be, however, a possible contingency that the tax or the entire tax due according to a return is itself not paid. The learned Chief Justice was inclined to the view that the balance of tax so due might fall within Section 230(1)(a) of the Indian Companies Act, but that was not the case before them. We do not think that either the decision or the observations in this case can be of any assistance to the appellants. There is no sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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