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TMI Blog1987 (6) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal : (1) For that the company being in liquidation has no income referred to in section 5 of the Income-tax Act 1961. (2) For that the Finance Act, 1981 has not fixed any rate of tax for a company in liquidation which is neither a company in which the public are substantially interested nor a company in which the public are not substantially interested. (3) For that no valid assessment can be made on the basis of a return of income signed and verified by one of the liquidators which return is non est in law having regard to section 140(c) of the Income-tax Act, 1961. 3. The contention of learned counsel for the assessee is that there is vast distinction between a company which is a going concern and a company in liquidation. He took us through several provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959 and enumerated several distinctive features between a company as a going concern and a company in liquidation. He pointed out that the method of accounting prescribed for these two types of companies is also different. It is contended by him that no profit & loss account is required to be prepared in the case of a company in liquidation and only an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liquidator as the Principal Officer of the company ; but after the amendment there is no provision left for signing the return by the liquidator and this is indicative of the intention of the Legislation that a company in liquidation is not required to file any return of income. It is also contended by him that the return of income signed and verified by the liquidator is non est in law and the assessment based thereupon is a nullity. 7. In reply, the learned departmental representative contended that a company in liquidation is a taxable entity. He supported the orders of the tax authorities below. Further, it is contended by him that even if it was an invalid return the assessment order is valid since it could well be framed in absence of any return. 8. Lot of confusion is being created in making distinction between a company as a going concern and a company in liquidation. Simply because of winding up proceedings a company does not lose its original character. During the entire winding up proceedings till its dissolution the company retains its original character. There cannot be two categories of companies, viz., the company as a going concern and a company in liquidatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent of the company to administer the property of the company for purposes prescribed by the statute. In distributing the assets including accumulated profits, the liquidator acts merely as an agent or administrator for and on behalf of the company." These observations of the Hon'ble High Court in the case of Official Liquidator v. CIT [1971] 80 ITR 108, 124 (Cal.) are pertinent : "The contention of the Official Liquidator that there cannot be any question of any assessment of a company in liquidation, also appears to be of no material consequence. There is no provision, either in the Income-tax Act, or in the Companies Act, which exempts a company in liquidation from assessment. On the other hand, section 178 of the Income-tax Act clearly indicates, to my mind, that a company in liquidation is liable to assessment, as otherwise, there cannot be any question of setting apart any sum of money which may be payable by the company at a later date. Whether as a result of assessment, any liability will, in fact, arise or not is a matter to be determined in the assessment proceeding. It appears that the decision of the Allahabad High Court in the case of Offl. Liq. of the Agra Spg. & Wv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the C.B.D.T. Circular dated 14-1-77 in exercise of powers u/s. 119(2)(a) of the Income-tax Act, 1961 there has been no levy of income-tax authorised by law." 12. Learned counsel for the assessee made reference to section 143(3) of the Income-tax Act which requires the ITO to make an assessment of the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment. In the instant case the ITO determined the total income of the assessee but did not compute in the order of assessment itself the amount of tax payable by the assessee. This has been taken by the learned counsel for the assessee as a serious defect making the assessment order invalid. This ground was unsuccessfully raised before the CIT (Appeals). He observed as under :-- "It is no doubt true that in the body of the assessment order, tax payable has not been mentioned by the ITO. However, this deficiency neither invalidates the order nor justifies the appellant's contention that no tax payable. Tax payable has been determined by the ITO in Form No. ITNS-150 which has to be taken as part and parcel of the order. The Form No. ITNS-150 is also under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 520 of the Companies Act, 1956. (2) For that having regard to the combined effect of sections 560(4), 520 and 518 of the Companies Act, 1956 excluding the operation of computation provisions contained in section 57(iii) of the Income-tax Act, 1961 making it impossible for the charging section 56 go together with section 57 the ratio laid down by the Supreme Court in 128 ITR 294 applies with the result that interest on short-term deposits is not taxable." 17. Contention of learned counsel for the assessee is that the entire amount of Rs. 2,39,712 is the cost of voluntary winding up which is charged on the assets of the company and subject to the rights of secured creditors, if any, is payable out of the assets of the company in priority to all other claims. It is also contended by him that the company court only has jurisdiction to supervise the propriety of incurring those costs and expenses and the ITO has no jurisdiction to question or otherwise assess the reasonableness of those expenses. From these premises the learned counsel has further developed an argument that having regard to the combined effect of sections 560(4), 520 & 518 of the Companies Act, 1956 the ITO is le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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