Winding-up asset distribution must first account for quantified tax dues before any balance is remitted to shareholders.

In voluntary winding-up proceedings under Section 518 of the Companies Act, 1956, the Court may determine the amount needed to meet income-tax liabilities before any distribution of remaining assets to shareholders. The petition sought quantification of tax payable, including tax on interest earned on fixed deposits, so that the company's assets could be repatriated after winding-up. On the revenue's affidavit, the Court accepted that admitted or possible tax dues had to be retained. The quantified tax amount was therefore required to be set aside, and only the balance could be distributed or remitted to shareholders.

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Issues: Whether, in proceedings for voluntary winding-up, the Court should determine and set aside the income-tax liability before permitting distribution of the company's remaining assets to the shareholders.

Analysis: The petition was moved under Section 518 of the Companies Act, 1956 for determination of the amount of income-tax payable so that the assets could be repatriated after winding-up. On the revenue's affidavit, the income-tax liability, including tax on interest earned on fixed deposits, was quantified and the Court accepted that an amount should be retained to meet the admitted or possible tax dues before any remittance to shareholders.

Conclusion: The prayer was allowed to the extent that the quantified amount of tax dues was required to be set aside, and the balance amount was permitted to be distributed or remitted to the shareholders.

Ratio Decidendi: In a winding-up proceeding under Section 518 of the Companies Act, 1956, the Court may determine the amount to be retained for statutory dues before allowing distribution of the remaining assets.

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