1977 (12) TMI 6 - HC - Income Tax

Winding-up Court Allows Petitioner to Issue Advance Tax Notices Post-Tax Quantification

The court granted leave to the petitioner to issue notices for advance tax payment for the relevant year, emphasizing the court's ability to intervene ... Advance Tax, Company Court, Income Tax Authorities, Winding Up Issues:Petition under s. 446(1) of the Companies Act, 1956 for granting leave to the petitioner to make orders under s. 210 of the I.T. Act, 1961 for advance tax payment by a company in liquidation.Analysis:The petitioner sought leave to make orders under s. 210 of the I.T. Act, 1961 for advance tax payment by a company in liquidation. The official liquidator contended that no leave should be granted as the income-tax of the company is not liable to be taxed, citing an order of the court. However, the petitioner relied on case law stating that income-tax payment is part of winding-up costs and expenses, and the official liquidator can be required to retain the amount payable under the Companies Act. The court held that the Income-tax Officer can proceed with assessment or reassessment without obtaining leave under the Companies Act, and the winding-up court can safeguard the interests of the company and creditors regarding tax liabilities.The official liquidator argued that the Income-tax Officer must seek court leave before issuing notices under the I.T. Act, citing relevant case law. The petitioner contended that statutory provisions of the I.T. Act empower the ITO to issue notices without court leave, and income-tax is a necessary expense in liquidation under the Companies Act. The court considered the contentions and held that the ITO can issue notices for advance tax payment, subject to court approval to safeguard the interests of the company and its creditors.Regarding the scheme in a court order dated December 15, 1975, the official liquidator claimed that advance tax was paid in previous years based on an undertaking by the CIT, but no such undertaking was given this year. The official liquidator argued that the income of the company did not reach taxable limits due to unpaid interest to creditors. The petitioner contended that the scheme was not yet operative and had no binding effect. The court refrained from expressing opinions on pending appeals related to the scheme, citing precedents that allow the ITO to proceed with tax assessments and the winding-up court to determine tax liabilities to protect the company and creditors' interests.In conclusion, the court granted leave to the petitioner to issue notices for advance tax payment for the relevant year, emphasizing that the court can intervene post-tax quantification to ensure the company and creditors' interests are safeguarded. The court relied on established legal principles to support its decision, balancing the statutory powers of the ITO and the court's oversight role in winding-up proceedings.