TaxTMI 
TaxTMI 
1972 (3) TMI 22
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....under section 446 of the Act as the company was under, liquidation by the order dated May 10, 1968. The Income-tax Officer did not however, pay any heed to that, request and reminded the liquidator that his attention had already been drawn to section 178 of the Income-tax Act in the earlier communication. When the further effort of the liquidator, to arrive at a workable arrangement with the income-tax authorities did not succeed, he filed the present application challenging the validity of the Income-tax Officer's notice, annexure "I", and asking for the directions of this court. In doing so, the liquidator has pointed out that the Income-tax Officer has issued the notice (annexure "I") without making any enquiry or calling for any information from him, without hearing him, and without even informing him of the basis on which he has been required to set aside the amount of Rs. 41 lakhs for the payment of the income-tax. It has been pointed out that the Income-tax Officer had preferred a claim for Rs. 41 lakhs, but it was admitted only to the extent of Rs. 1,12,583 as an ordinary claim and the balance of the claim amounting to Rs. 39,87,417 was rejected for the reasons stated in th....
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....s court to entertain and adjudicate upon the application of the liquidator on the ground that the Income-tax Act is a special enactment and is a code by itself. He has also taken the plea that section 178 of the Income-tax Act "creates a charge upon the assets of the company in the hands of the liquidator securing thereby the recovery of such taxes as may become due and payable by the company after the liquidator has been appointed". Reference in this connection has been made to sub-section (6) of section 178. The respondent has, however, admitted that the details or the break-up of the amount of Rs. 41 lakhs mentioned in the notice, annexure "I", had not been furnished to the liquidator, and that the leave of the court was not taken for the purpose of issuing the notice. According to him, no such leave was necessary. He has denied that he did not make any enquiry or collect any information before issuing the notice, and has stated that he had gone through the record which showed that all such enquiries as were necessary for the purpose of estimating the liability for the pending assessment years had already been made. The source from which these enquiries were made has, however, n....
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....hen a winding-up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding-up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose." The object of the sub-section has been stated as follows in Palmer's Company Law, twenty-first edition, page 768, with reference to section 231 of the English Companies Act of 1948 which is quite similar: " The object of the winding-up provisions of the Companies Act, 1862, said Lindley L.J. in In re Oak Pits Colliery Co. is to put all unsecured creditors upon an equality and to pay them pari passu. To accomplish this it was indispensable that proceedings against the company by way of action, execution, distress or other process should be suspended ; otherwise the winding-up would resolve itself into a scramble for the assets." It is in fact well settled that the assets of a company in liquidation are held in trust for all the parties entitled, and even if one cestui que trust is able to get possession of a part of the trust property, he must....
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....te legal under sub-section (2) of section 537 for it is only a proceeding for the recovery of the income-tax. It will be sufficient to say, however, that there is nothing in the sub-section which could be said to provide an overriding priority for the recovery of any tax or impost or any dues payable to the Government in addition to the priority permissible under section 530 of the Act. In other words, sub-section (2) of section 537 cannot be interpreted to mean that once the income-tax is determined, it will be permissible for the Income-tax Officer to proceed to recover it without the leave of the court and in violation of the rule of priority stated in section 530. Moreover, the legal position regarding the recovery of income-tax after its quantification has been considered by their Lordships of the Supreme Court in S. V. Kondaskar, Official Liquidator, and Liquidator of the Colaba Land and Mills Co. Ltd. v. V. M. Deshpande, Income-tax Officer. Their Lordships have dealt with the dispute regarding the reassessment of income-tax without the leave of the court under section 446(1) of the Act in respect of a company which had been ordered to be wound up and, after examining the leg....
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....g in section 178 to justify such a conversion, for the section reads as follows: " 178. (1) Every person- (a) who is the liquidator of any company which is being wound up, whether under the orders of a court or otherwise ; or (b) who has been appointed the receiver of any assets of a company,(hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the Income-tax Officer who is entitled to assess the income of the company. (2) The Income-tax Officer shall, after making such enquiries or calling for such information as he may deem fit, notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the Income-tax Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company. (3) The liquidator- (a) shall not, without the leave of the Commissioner, part with any of the assets of the company or the properties in his hands until he has been notified by the Income-tax Officer under sub-section (2) ; and (b) on being so notified, shall....
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....of engrafting a special provision for securing and ensuring easy recovery of income-tax in "preference" to all other debts owed by the company, and that the proviso to sub-section (3) now provides for the recovery of income-tax by stating that nothing in the sub-section shall debar the liquidator from parting with the assets or properties of the company for the purpose of payment of the income-tax on the same footing as payment to secured creditors. The learned counsel has made a reference to sub-section (6) for the argument that the provisions of section 178 shall override the provisions of the Companies Act in this respect. He has also argued, on the strength of Income-tax Officer, Ernakulam v. Indian Traders Bank (in liquidation), that section 178 creates a first charge on the amount set aside under sub-section (3) thereof for payment of the amount of tax admitted to proof. I have no doubt, however, that there is no force in this argument because there is nothing in any part of section 178 which could be said to support it. But, even if it is assumed, for the sake of argument, that section 178 creates any such super-priority or preference in respect of the income-tax payable by....