1965 (4) TMI 52

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....the said High Court in a petition under article 226 of the Constitution filed by the respondent. The India Fisheries (P.) Ltd.-hereinafter called the respondent-was a private limited company and was directed to be wound up by an order of the Bombay High Court, dated October 11, 1950, and a court liquidator was appointed as the official liquidator thereof with all powers under section 179 of the Indian Companies Act, 1913 (VII of 1913), to be exercised by him under section 180 without sanction or intervention of the court save and except in case of sales of immovable property belonging to the respondent. For the assessment year 1948-49, the respondent was assessed on December 8, 1950, the tax being assessed at Rs. 8,737-15-0. On or about ....

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....t. On November 25, 1959, the respondent filed a petition under article 226 of the Constitution and prayed for a writ, direction or order for setting aside the orders of the Income-tax Officer and the Income-tax Commissioner. He further prayed for any further writ, direction or order restraining the department from setting off the refund against the tax dues and directing them to hand over the balance to the official liquidator. The High Court held that the demand of Rs. 8,737-15-0 in respect of the assessment year 1948-49, being adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the official liquidator to the department. The High Court observed that "this claim thereafter was governed ....

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....s not take away this power Section 49E is in the following terms : "Where under any of the provisions of this Act, a refund is found to be due to any person, the Income-tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due. " On the face of this provision, there is no doubt that this section is not subject to any other provision of law. But it will be surprising if this power-can be exercised in such a way as to defeat the provisions of the Indian Companies Act. It is not denied by the learned Additional ....

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.... virtue of this section." The effect of these statutory provisions is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid pari passu. Therefore, once the claim of the department has to be proved and is proved in the liquidation proceedings, the department cannot by exercising the right under section 49E of the Income-tax Act get priority over the other unsecured creditors. If we were to read section 49E in the way suggested by the learned Additional Solicitor-General, it would be defeating the very object underlying sections 228 and 229 of the Companies Act, 1913. If there is an apparent conflict between two independent provisions of law, the special provision must prevail. Section 49E i....