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TMI Blog1998 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... Act No. 7 of 1986) (hereinafter referred to as "the Act"). After such acquisition, the undertaking stood transferred to and vested in the petitioner under section 3(2) of the Act. Section 3 of the Act provides for acquisition of rights of Anglo-French Textiles Limited and the right, title and interest of the owner in relation to the textile undertaking of that company is transferred to and vested absolutely in the Government by virtue of section 3(1) of the Act. By sub-section (2) of section 3 of the Act, the textile undertaking which vested in the Government stands transferred from the Government to the Corporation. Section 4 of the Act sets out the general effect of vesting. The textile undertaking is deemed to include all assets, rights, lease-holds, powers and other rights, but significantly omits any reference to liability. Section 5 of the Act specifically provides that every liability of the owner of the textile undertaking in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Government or the Corporation. Section 5(2)(a) of the Act declares that save as otherwise expressly provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) Arrears relating to contributions towards provident fund and contributions under the Employees State Insurance Act, 1948, payable by the owner ; (iii) Arrears of excise duty, sales tax, dues relating to electricity and dues of a local authority. CATEGORY-II : Secured creditors including banks and institutions. CATEGORY-III : (i) Sundry creditors ; (ii) Other liabilities. Section 17(2) of the Act provides that if on examination of the claims, the Commissioner is of the opinion that the amount paid to him under the Act is not sufficient to meet the liabilities specified in any lower category, he shall not be required to examine the liabilities in respect of such lower category. Section 15 of the Act lays down the period of limitation for making claims. The limitation prescribed is 30 days from the specified date and the proviso thereto empowers the Commissioner to extend the period for a further period of 30 days. Section 20 of the Act provides that if out of the moneys paid to the Commissioner, as specified in the Act, there is any balance left, after meeting the liabilities specified in the Second Schedule, such balance may be paid by him to the owner. Section 23 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Acquisition Act, as void under section 281 of the Income-tax Act, should not be made. The petitioner thereafter instituted this writ petition. It is not necessary to refer to the correspondence exchanged between the parties or to another petition which the petitioner had filed, on which this court had directed the petitioner to furnish replies to an earlier notice. Notwithstanding the reply furnished to the earlier notices, the Assessing Officer having proceeded to initiate proceedings under section 281 of the Income-tax Act, the assessee was compelled to approach this court for relief. It is submitted by learned counsel for the petitioner that the Acquisition Act, has in very clear terms provided, that none of the liabilities of the company were taken over; that the liabilities remain that of the company, Anglo-French Textiles Limited ; that the terms of the Acquisition Act have been given an overriding effect ; and it is therefore not permissible for the respondent to assert any right to recover the arrears of tax due from the company which had owned the industrial undertaking, from the petitioner, counsel submitted that the effect of the Acquisition Act was not to bring ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Income-tax Act, 1922, held that the word "transfer" must be given its full and actual meaning and there is no justification for restricting the wide comprehension of the word "transfer" to voluntary transfers by the application of the ejusdem generis rule. The court therein negatived the claim of the assessee that the compensation received as a result of compulsory acquisition is not liable to be charged to capital gain, The court held that the capital gain resulting from compulsory acquisition is capital gain arising as a consequence of transfer. In the case of CIT v. Bangalore Transport Company Ltd. (In Liquidation) [1967] 66 ITR 373, the Supreme Court, while considering a claim of the assessee, that it is not liable to tax at all during a particular assessment year, as its business was acquired by the Government in the middle of the financial year, held that the taxable profits, under the scheme of the Income-tax Act, being determined at the end of the previous year, it does not follow therefrom that profits earned during a part of the year is free from the charge of income-tax. The court held that the profits of the assessee therein upto the date of acquisition was exigib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act does not vest any such powers in the Assessing Officer. It would be absurd to suggest that Parliament or the Legislature of a State or the Legislature of a Union Territory should apply to the Assessing Officer and seek permission before enacting the law which provides for compulsorily acquiring the property belonging to the assessee. If the proposition contended for the Revenue is to be accepted, in almost every case of land acquisition, it will be open to the Assessing Officer to contend that the unpaid taxes of the owner of the acquired land should be paid by the Government and that the acquired land can be brought to sale by the Tax Recovery Officer for recovering the dues of the person whose land was compulsorily acquired. It is equally absurd to suggest that the Legislature or Parliament should satisfy the Assessing Officer as to the adequacy of the compensation awarded to show that the amount awarded or provided for in the statute can be regarded as adequate consideration for the purposes of section 281 of the income-tax Act. Compulsory acquisition by the State of the undertaking owned by an assessee, under a validly enacted law is wholly outside the purvi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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