9911796707
TMI Blog1998 (8) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the application and also directed payment of interest. The said order has not been challenged. The present dispute is regarding payment of interest pursuant to the order of this court dated August 31, 1996. On behalf of the Department of Income-tax, Government of India, the same has been opposed on the ground that the department has a preferential right in respect of the properties sold by the liquidator and that the capital gains tax has preference over dues of other secured creditors. The department has claimed two amounts one in an amount of Rs. 10 lakhs and the other of about Rs. 90 lakhs as capital gains tax pursuant to the sale of a property. The amount of Rs. 10 lakhs is not in issue here. The official liquidator as per para. 7 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the Assessing Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company. (3) The liquidator--- (a) shall not without the leave of the Chief Commissioner or Commissioner, part with any of the assets of the company or the properties in his hands until he has been notified by the Assessing Officer under sub-section (2) ; and (b) on being so notified, shall set aside an amount equal to the amount notified and, until he so sets aside such amount, shall not part with any of the assets of the company or the properties in his hands : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO [1996] 219 ITR 498 there was a conflict of views amongst the High Courts as to the interpretation of section 178(1) and (2) of the Income-tax Act and section 530 of the Companies Act. The question which the apex court was called upon to answer was whether the dues of secured creditors under section 529A of the Companies Act had prior claim over the claim of the department under section 178(1) and (2) of the Income-tax Act. The apex court held, considering the purpose for which the section was introduced in the year 1961, that the object sought to be achieved by the provisions in Chapter XV was "to fasten liability to pay the tax". The apex court while so holding upheld the views taken by the High Courts of Kerala and Andhra Pradesh. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liquidator of his appointment, the Assessing Officer must assess the tax which is due or likely thereafter to become payable by the company. The Assessing Officer therefore will consider the material then available for the purpose of determining the tax dues. What becomes clear is that what transactions may come in future and in respect of which tax may become payable prima facie cannot be the subject-matter of the order which the Assessing Officer may pass. Sub-section (3) is also relevant for the purpose of discussion. The said sub-section in clause (a) provides that liquidator shall not without leave of the Chief Commissioner or Commissioner part with any assets of the company or the properties in his hands until he has been notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to Government on the date of liquidation or for meeting such costs and expenses of the winding up of the company as are in the opinion of the Chief Commissioner or Commissioner reasonable. The embargo created by clauses (a) and (b) of sub-section (3) in the event the liquidator has to part with assets or properties, is not applicable in the event the liquidator has to dispose of assets or properties for payment of tax payable by the company; or making any payment to secured creditors whose debts are entitled under law to priority of payment over others or for meeting such costs and expenses of the winding up of the company as are in the opinion of the Chief Commissioner or Commissioner reasonable. In such a situation the liquidator has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 529A and 550 of the Companies Act harmoniously. Section 178 of the Income-tax Act was introduced in 1961, whereas section 529A and the amendment to section 530 of the Companies Act have been brought by an amendment in the year 1985. Section 529A has been given overriding effect over other dues including the dues under section 530(1)(a) and also any other law for the time being in force. A proper reading of these two sections of the Companies Act re (I with section 178 of the Income-tax Act as interpreted by the apex court must clearly therefore lead to the conclusion that after the requirement of section 178(2) has been complied with the subsequent tax dues are subject to sections 529A and 530 of the Companies Act. Dues under section 529 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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