TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Priority of Income Tax in Liquidation: Demands upheld, direct payments impermissible. Funds to settle claims.</h1> <h3>Vijay Bank, Colaba Branch, Mumbai Versus Joint Commissioner of Income Tax And Others</h3> The court held that the demand notice issued by the assessing authority under the Income Tax Act was valid. Income tax dues were given priority over other ... Recovery order - garnishee order - interest income during liquidation proceedings - whether the amount payable under the EMIs can be said to be the independent income of the 3rd respondent when it is under liquidation - Held that:- On the strength of an interim order, the 2nd respondent has been depositing the EMIs in a nationalised bank and the amount is earning interest also - assessee on the one hand and the 1st respondent on the other hand had put forward their claims before the official liquidator - the amount, that became payable up to this date from the 2nd respondent, together with interest, which are now said to be in the Syndicate Bank, Banjara Hills Branch shall be made over to the 3rd respondent company, which is now under liquidation. the petitioner on the one hand and the 1st respondent on the other hand shall be entitled to submit their claims before the official liquidator and he in turn shall make the payments out of the available sources to the petitioner and the 1st respondent in accordance with the priorities that are provided for under the Companies Act. This exercise shall be completed within a period of three months. Issues:1. Validity of demand notice issued by the assessing authority under the Income Tax Act.2. Priority of income tax dues over other claims in case of liquidation.3. Legality of arrangement for direct payment of EMIs between parties.4. Disbursement of funds held by the 2nd respondent during liquidation proceedings.Analysis:1. The petitioner, a nationalized bank, challenged a demand notice issued by the assessing authority to recover income tax dues from a company (3rd respondent) that had stopped manufacturing activities and entered a hire purchase agreement with the 2nd respondent for machinery purchased with a loan from the petitioner.2. The assessing authority claimed priority for income tax dues over other claims, arguing that the arrangement between the parties for direct payment of EMIs was not binding and that the 3rd respondent's machinery was under the control of the 2nd respondent.3. The court noted that while the arrangement for direct payment of EMIs was permissible initially, it could not continue once the 3rd respondent entered liquidation proceedings, as per the Companies Act's priorities for creditors. The court directed the funds held by the 2nd respondent to be transferred to the 3rd respondent under liquidation.4. The court ordered the official liquidator to manage the funds and ensure all claims, including those of the petitioner and the assessing authority, were settled according to the Companies Act's priorities within three months. The court disposed of the writ petition and the miscellaneous petition without costs.
TaxTMI 
TaxTMI 
