High Court rules income of company in liquidation not taxable, exempts from filing estimate & paying interest

The High Court ruled in favor of M/s. Golcha Properties (P.) Ltd., a company in liquidation, stating that the income of a company in liquidation is not taxable. The court held that the assessee was not required to file an estimate u/s 212(3A) and was not liable to pay interest u/s 217(1A) due to a genuine belief that the income was exempt. The Commissioner's order imposing interest was quashed, and the court answered the reference question affirmatively, directing the Tribunal to receive a copy of the judgment.

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Issues involved:
The judgment involves a reference u/s 256(1) of the Income-tax Act, 1961 regarding the obligation of the assessee to file an estimate u/s 212(3A) and liability to pay interest u/s 217(1A).

Summary:

The case pertains to M/s. Golcha Properties (P.) Ltd., a private limited company in liquidation, which declared an income of Rs. 12,94,515 as exempt while filing its return for the assessment year 1971-72. The Income-tax Officer assessed the entire income of the company and noted that the official liquidator did not file estimates u/s 212(3A) due to the belief that the income was not taxable. The Income-tax Officer served a notice u/s 210 for advance tax, which was paid by the official liquidator without filing the estimate. Subsequently, the Commissioner of Income-tax issued a notice u/s 263, stating that interest u/s 217(1A) should have been charged. The Commissioner's order was challenged by the assessee before the Tribunal, which quashed the order. The Commissioner then sought a reference to the High Court u/s 256(1).

Upon hearing both parties, the High Court considered the Supreme Court's ruling on winding-up orders, stating that the income of a company in liquidation is not taxable. Citing relevant case laws, the court held that the assessee was not obligated to file an estimate u/s 212(3A) and was not liable to pay interest u/s 217(1A) due to a bona fide belief that the income was not taxable. The court answered the reference question in the affirmative, ruling in favor of the assessee.

The High Court directed the Additional Registrar to send a copy of the judgment to the Tribunal as per the provisions of the Income-tax Act, 1961.

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