Court sets aside attachment by Tax Recovery Officer, grants Official Liquidator possession & valuation authority.

The court allowed the application, setting aside the attachment by the Tax Recovery Officer on the property of the company in liquidation. The Official Liquidator was granted permission to take possession of the property, proceed with the liquidation process, and appoint a government-approved valuer for property valuation. The court emphasized the priority of tax liabilities under relevant legal provisions and directed the respondents to hand over books and records to the Official Liquidator for further proceedings.

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Issues Involved:
1. Attachment and auction sale of the property of the company in liquidation.
2. Custody and valuation of the company's assets.
3. Priority of claims between the Official Liquidator and the Income Tax Department.

Issue-wise Detailed Analysis:

1. Attachment and Auction Sale of the Property of the Company in Liquidation:
The Official Liquidator filed an application to remove the attachment and prevent the respondents from proceeding with the auction sale of the property situated at No.24, Kolhar, IDA, Bidar, Karnataka. The company, M/s. Jupiter Bioscience Limited, was ordered to be wound up on 10.1.2014, and the Official Liquidator was appointed. The Income Tax Department had attached the property under the provisions of the Income Tax Act, 1961, due to a pending tax claim of Rs. 71.23 crores. The respondents argued that the attachment was prior to the winding-up order and that the Revenue's right to recover the amount due should be given priority.

2. Custody and Valuation of the Company's Assets:
The Official Liquidator argued that under Section 441(2) of the Companies Act, 1956, the winding-up commences from the time of presentation of the petition, and the properties of the company are deemed to be in the custody of the court. Therefore, the respondents should be restrained from alienating the property. The Official Liquidator also emphasized the need to value the properties through a Government-approved valuer and requested the court to appoint one.

3. Priority of Claims Between the Official Liquidator and the Income Tax Department:
The respondents contended that under Section 178 of the Income Tax Act, the Official Liquidator is required to set apart the amount due to the Income Tax Department. The Supreme Court's decision in Imperial Chit Funds (P) Limited vs. Income Tax Officer (1996) 219 ITR 498 (SC) was cited, which held that the tax liability gets priority over other debts to the extent of the amount set aside under Section 178. The Official Liquidator argued that the Income Tax Authorities should claim their dues like any other creditor, and the attachment needs to be raised to proceed with the liquidation process.

Judgment:
The court considered the submissions and noted that the winding-up order was passed on 10.1.2014, and the Liquidator was appointed. The claim of the respondents should be in terms of Section 178 of the Income Tax Act and Sections 529, 529A, and 530(1)(a) of the Companies Act. The Supreme Court's decision in Imperial Chit Funds (P) Limited was referenced, which clarified the scope of Section 178 and the priority of tax liabilities.

The court concluded that the attachment made by the Tax Recovery Officer should be set aside, allowing the Official Liquidator to take possession of the property and proceed in accordance with the law. The respondents were directed to hand over any books and records to the Official Liquidator. The Official Liquidator was also permitted to move the court for the appointment of an approved valuer after taking possession of the property. The claim of the Revenue should be considered by the Official Liquidator in light of the relevant legal provisions and the Supreme Court's decision.

Order:
The application (C.A.No.1374/14) was allowed. The attachment by the Tax Recovery Officer was set aside. The Official Liquidator was permitted to take possession of the property and proceed in accordance with the law. The respondents were directed to hand over books and records to the Official Liquidator. The Official Liquidator was allowed to move the court for the appointment of an approved valuer after taking possession of the property. The claim of the Revenue was to be considered by the Official Liquidator as per the relevant legal provisions and the Supreme Court's decision.

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