Liquidation priority for tax dues is limited to liabilities assessed and payable within the statutory look-back period.

Priority under section 530(1)(a) of the Companies Act is confined to taxes and cesses that became presently due and payable within the twelve months before the relevant date, meaning assessed liabilities enforceable on that date and not merely contingent amounts. Income-tax and sales tax claims qualified only where assessment and demand fell within that period; claims arising later, or outside the statutory look-back, ranked as ordinary debts in liquidation. Penalty claims were disallowed because they were sought without proper regard to the winding-up framework and the constraints on the liquidator. The matter was remitted for fresh disposal in line with these principles.

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Issues: (i) Whether, for priority under section 530(1)(a) of the Companies Act, a tax or cess must have become presently due and presently payable within the twelve months before the relevant date. (ii) Whether the revenue's claims for income-tax, sales tax and penalties were admissible as priority claims in winding up.

Issue (i): Whether, for priority under section 530(1)(a) of the Companies Act, a tax or cess must have become presently due and presently payable within the twelve months before the relevant date.

Analysis: The provision requires that the debt must be due from the company on the relevant date and must have become due and payable within the preceding twelve months. The words "due" and "due and payable" were held to denote a liability that is presently payable and capable of enforcement, not merely a contingent or future liability. The Court preferred the view that assessed tax becomes due only after assessment and service of the demand notice, and that the non-obstante clause in the Income-tax Act does not enlarge the priority created by the Companies Act.

Conclusion: Yes. Priority under section 530(1)(a) is confined to taxes and similar dues that became presently payable within the prescribed twelve-month period.

Issue (ii): Whether the revenue's claims for income-tax, sales tax and penalties were admissible as priority claims in winding up.

Analysis: Income-tax and sales tax claims were held to rank as preferential debts only where the relevant assessment and demand occurred within twelve months before the relevant date. Amounts arising after the winding-up date, or claims not satisfying the statutory time requirement, ranked only as ordinary debts. Penalty claims for non-payment by the liquidator were rejected because the liquidator was constrained by the company law regime and the penalties had been sought without properly considering whether there was reasonable cause for non-payment. The Company Application was remitted for fresh disposal in accordance with these conclusions.

Conclusion: The revenue succeeded only to the extent of those tax dues that satisfied section 530(1)(a); the penalty claims were disallowed.

Final Conclusion: Government tax dues are entitled to priority in liquidation only when the liability became presently enforceable within the statutory look-back period, while penalty claims unsupported by the winding-up framework are not admissible; the matter was therefore partly allowed and remitted for further action consistent with these findings.

Ratio Decidendi: Under section 530(1)(a) of the Companies Act, priority is limited to government tax dues that are both assessed and presently enforceable within twelve months before the relevant date, and the Companies Act priority scheme cannot be enlarged by provisions in the taxing statute.

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