Successor-in-interest liability for tax arrears remains enforceable despite acquisition where statutory dues were not covered by the balance-sheet protection.

Successor-in-interest liability remained enforceable despite the acquisition arrangement because the assets and liabilities of the taken over company had vested in the government company under the acquisition law. The protection invoked by the appellant was limited to liabilities reflected in the audited balance-sheet as on 31 December 1975, and the income-tax dues were not shown there. A statutory tax liability could not be avoided on that basis, so the appellant was bound to discharge the arrears and interest. The challenge therefore failed, and liability for the income-tax dues was upheld.

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Issues: Whether the appellant, as successor-in-interest of the taken over company, remained liable to pay the income-tax arrears and interest for the assessment year 1974-75 despite the acquisition arrangement.

Analysis: The court proceeded on the footing that the assets and liabilities of the taken over company had vested in the government company under the acquisition law. The protection relied on by the appellant was confined to liabilities reflected in the audited balance-sheet as on 31 December 1975, while the tax dues were not shown therein. A statutory tax liability could not be avoided on that basis, and the appellant, as successor-in-interest, was bound to discharge the dues.

Conclusion: The appellant was held liable for the income-tax arrears and interest, and the challenge failed.

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