Insolvency Court jurisdiction extends to waiver of tax interest; Official Assignee need not first approach the tax board.

Section 7 of the Presidency Towns Insolvency Act, 1909 gives the Insolvency Court broad authority to decide questions of law or fact arising in insolvency and to do complete justice in distribution of the insolvent's estate. On that basis, the court's control over distribution was treated as distinct from the assessing authority's duty to determine tax liabilities under the Income-tax Act, 1961. Section 178 was held not to govern waiver of interest, and the Official Assignee was not required to first approach the CBDT. The Insolvency Court itself can decide whether interest payable under the Income-tax Act may be waived.

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Issues: Whether the Insolvency Court has jurisdiction under Section 7 of the Presidency Towns Insolvency Act, 1909 to consider waiver of interest payable under the Income-tax Act, 1961, or whether the Official Assignee must approach the Central Board of Direct Taxes.

Analysis: Section 7 confers full power on the Insolvency Court to decide all questions of law or fact arising in insolvency or necessary for doing complete justice and making complete distribution of property. Section 178 of the Income-tax Act, 1961 deals with the obligation to set apart amounts payable to the tax department, but it does not govern the question of waiver of interest. The Court held that the statutory duty of the assessing authority to assess tax is distinct from the Insolvency Court's control over distribution of the insolvent's assets, and that the ultimate payment of tax, interest, or penalty depends on the funds available with the Official Assignee. In that setting, requiring the Official Assignee to first move the Central Board of Direct Taxes was held unnecessary.

Conclusion: The Insolvency Court itself can decide the question of waiver of interest, and the Official Assignee is not required to approach the Central Board of Direct Taxes first.

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