Income tax claims become provable only after assessment and demand; pending assessments are not barred by winding up.

Income tax liability becomes a provable debt in winding-up only after assessment and demand; before that, the revenue is not a creditor, contingent creditor, or prospective creditor required to prove a claim in liquidation. Pending income-tax assessment proceedings are also not "other legal proceedings" within section 446 of the Companies Act, 1956, because assessment under the Income-tax Act follows a special self-contained code and is not a proceeding the company court can entertain or transfer. On that reasoning, assessment could continue notwithstanding the winding-up order, and the writ petition failed.

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Issues: (i) Whether the income-tax department became a creditor, contingent or prospective, of the company before assessment so as to be bound to prove its claim in the winding-up proceedings under section 391 of the Companies Act, 1956; (ii) whether pending income-tax assessment proceedings were "other legal proceedings" within section 446 of the Companies Act, 1956 and therefore could not continue without leave of the winding-up court.

Issue (i): Whether the income-tax department became a creditor, contingent or prospective, of the company before assessment so as to be bound to prove its claim in the winding-up proceedings under section 391 of the Companies Act, 1956.

Analysis: A creditor-debtor relationship in respect of income tax arises only after assessment and demand. Mere liability to tax does not make the revenue department a creditor, contingent or prospective, because before assessment there is no quantified claim capable of proof in liquidation. The authorities relied upon concerning contingent and prospective creditors were distinguished as relating to ordinary civil liabilities and not to tax assessment.

Conclusion: The department was not a creditor before assessment and was not bound to prove its claim in the winding-up proceedings.

Issue (ii): Whether pending income-tax assessment proceedings were "other legal proceedings" within section 446 of the Companies Act, 1956 and therefore could not continue without leave of the winding-up court.

Analysis: Section 446 is directed to proceedings over which the winding-up court can exercise control, entertain, transfer, or dispose of. Assessment proceedings under the Income-tax Act are governed by a special and self-contained code and are not proceedings that the company court can itself entertain or transfer. The phrase "other legal proceedings" was held not to extend to income-tax assessment proceedings prior to the stage of assessment.

Conclusion: Income-tax assessment proceedings up to the stage of assessment were not "other legal proceedings" within section 446 and did not automatically stop on the winding up of the company.

Final Conclusion: The writ petition failed because the Income-tax Officer retained jurisdiction to continue the assessment proceedings notwithstanding the winding-up order.

Ratio Decidendi: For purposes of winding-up law, income-tax becomes a provable debt only after assessment and demand, and pending assessment proceedings under the Income-tax Act are not "other legal proceedings" within section 446 of the Companies Act, 1956.

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