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of <h1>Court Rejects Company's Challenge on Criminal Liability Transfer Post-Nationalization</h1> <h3>Vijaya Commercial Credit Limited Versus Sixth Income-Tax Officer</h3> Vijaya Commercial Credit Limited Versus Sixth Income-Tax Officer - [1988] 170 ITR 55, 65 CTR 74, 34 TAXMANN 235 Issues:Challenge to the rejection of application for discharging the accused company from alleged offences under the Income-tax Act, 1961.Detailed Analysis:1. Grounds for Discharge:- The petitioner-company sought discharge on the basis of nationalization of the banking undertaking and lack of penal liability in the relevant provisions of the Income-tax Act before amendment.- The court rejected these contentions, stating that the criminal liability cannot be transferred to the new company post-nationalization.2. Imposition of Sentence on Conviction:- The petitioner argued that since the offence under section 277 of the Act carries a mandatory sentence of imprisonment, and being a body corporate, the imposition of such a sentence is not possible, rendering the proceedings against the company futile.- The court considered various authorities and noted that mens rea is an essential element of the offence, and the term 'person' in the Act does not encompass a company for imprisonment purposes.3. Legal Precedents and Interpretation:- Reference was made to the case of Kusum Products Ltd. v. S. K. Sinha, where it was observed that a company or juristic person cannot be imprisoned, and the legislative intent behind the Act does not support imposing imprisonment on a company.- The court highlighted that under section 278B, individuals responsible for the company's conduct can be held liable without prosecuting the company itself, as per the Supreme Court's ruling in Sheoratan Agarwal v. State of Madhya Pradesh.4. Decision and Quashing of Proceedings:- Considering the mandatory imprisonment provision and the futility of prosecuting a company incapable of imprisonment, the court allowed the petition and quashed the criminal proceedings against the petitioner-company in C.C. Nos. 4 to 17 of 1982 before the Special Court for Economic Offences in Bangalore.
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