TaxTMI 
TaxTMI 
1944 (11) TMI 17
X X X X Extracts X X X X
X X X X Extracts X X X X
....41, a provisional liquidator had been appointed and on 17th April, 1942, the winding-up order was made by this Court. The position, therefore, was that the assessment was actually made by the Income-tax Officer after the date of the winding-up order, but was in respect of the assessment year 1941-42, and was based on the profits of the year 1940-41. The liquidators, having received the assessment, took the view that the proper course would be for the Income-tax Officer to prove in the liquidation for the .tax claimed; and they so informed him. After some correspondence, the Income-tax Department intimated that they proposed to proceed under Section 46 of the Income-tax Act, and that they had issued a recovery certificate in respect of the amount of the assessment of 25th February, 1943, to the Collector of Allahabad for recovery of the tax in question under that section "as if it were an arrear of land revenue." These are the material facts which have led to the present application by the liquidators to the High Court in the winding up of the Company. In view of the many points raised, it is important to observe that the relief asked for before us by the liquidators is, in ef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to entertain this question. This has been argued somewhat late in proceedings, but we shall do well to deal with it first, since it is a point which is in the nature of a demurrer and is, moreover, one both of difficulty and importance. It rests on Section 226(1) of the Government of India Act, 1935, which provides that: "Until otherwise provided by Act of the appropriate Legislature, no High Court shall have any original jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof acccording to the usage and practice of the country or the law for the time being in force.'' We do not propose to embark on the entertaining question whether the jurisdiction exercised by the High Court in winding-up under the Indian Companies Act, 1913, is "original" jurisdiction within the meaning of this section, because we think that this demurrer can be better disposed of on other grounds. Mr. Pathak relies on the case of Governor-Qeneral in Council v. Raleigh Investment Go,, Ltd. [1944] 12 ITR 265 , in which the Federal Court, reversing a decision of the Calcutta High Court, has recently held that certain proceedings on the ori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nue." We think this important because the last words of the a sub-section "the law for the time being in force" govern the words "any act ordered or done in the collection thereof," but do not, as we read the section, govern the words "concerning the revenue." As we read it, this means that any matter concerning the revenue is placed without any qualification outside the original jurisdiction of a High Court; but only such matter concerning the "collection" of the revenue are placed beyond the jurisdiction of a High Court as are "ordered or done according to the usage and practice of the country or the law for the time being in force." It is, therefore, as we view the matter, a condition precedent to the ousting of the jurisdiction of a High Court in a case concerning any act ordered or done merely in the collection of the revenue (as opposed to an act or order concerning the revenue itself) that the act or order should be one done or ordered in accordance with the usage and practice of the country or the law for the time being in force. At first sight it is possible to say that this construction of Section 226(1) of the Government of India Act, 1935, is an inadmissible one in v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reasoning we have applied above to Section 226(1) of the Government of India Act. But, if it is examined, we do not think it is. In the Bombay case there was no question but that the Collector, in proceeding against the plaintiff's house, was putting into motion a proceeding which the Bombay Regulation authorized to be taken. What was complained of was, not that he had no power to proceed under the Regulation, but that his manner of doing it was irregular, and in that sense only the proceeding became illegal. There was no challenge to the procedure per se, but only to the steps taken in execution of it; and this, we think, is what their Lordships refer to when they speak of "an act bona fide believed to be done according to the Regulations...........'' Now, our case, as we see it, is very different. Section 226(1) of the Government of India Act requires the actor order in the matter of the "collection '' of the revenue to be one which is "according," not to a particular Regulation or Statute, but to the whole of "the law for the time being in force." What is challenged before is, not that any particular step taken in enforcing the ascertained law is illegal, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., nor its amount is or can be, in dispute. The sole question is whether the Department has the right to collect it in a particular way which will, or may, react unfavorably on the statutory rights of others. For any purpose now before us, the assessment stands as a perfectly valid assessment. The question is, therefore, in our view, one concerning an act "ordered or done in the collection" of the revenue, and not one concerning the revenue itself. In our judgment, it follows that we have first to decide whether the collection of the revenue in the particular way chosen by the Income-tax Department in this case is one which is in accordance with the law for the time being in force. If it is, then Section 226 of the Government of India Act sweeps away our jurisdiction. If it is not, then we retain our jurisdiction, But it is contended by the Department that even if this is so then "the law for the time being in force" is, so far as it is concerned, to be found in the Indian Income-tax Act, 1922, and nowhere else. In other words, it is said that in the present case Section 46 of the Indian Income-tax Act is the law, so far as the Income-tax Department is concerned. This we cannot a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Indian Income-tax Acts; are still in accordance with the law for the time being in force, notwithstanding the winding-up of the company, on the ground that neither the general prerogative of the Crown to prefer its own debt to the debt of the subject, nor its particular rights under Section 46 have been taken away by anything in the Indian Companies Act, 1913. This rests on a general argument that the prerogative of the Crown cannot be taken away except by express enactment, and or. a particular argument that there is that to be found in the Indian Companies Act which, so far from taking away the Crown's rights, expressly preserves them. The former of these propositions, so far as its effect on Section 171 of the Indian Companies Act is concerned, relies on a decision of the Calcutta High Court (In re West Laikdih Goal Co., Ltd. [1926] ILR 53 Cal. 378 ") which has been followed in this Court in the case of Comntissioner of Income-tax v. Official Liquidators, Agra Spinning and Weaving Mills Co. [1934] 2 ITR 79 (All.), both of which we are respectfully compelled to think were wrongly decided, and, indeed, would not have been so decided, if the attention of the Court had b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Companies Act, which groups together revenue, taxes, cesses, rates, wages and salaries of clerks and servants, wages of labourers and workmen, Workmen's Compensation Act claims and sums due to employees' provident funds, that, whatever may be said about it, the Crown's prerogatives have in fact been extensively tampered with. Instead of the Crown any longer having a prerogative of preference for its own debt, it has to be content with a status of equality with servants, workmen and other classes. It cannot be supposed that the Crown's rights were so dealt with in this way otherwise than deliberately ; and it cannot, therefore, any longer be suggested that there was no express or implied intention on the part of the Legislature to subject the prerogatives of the Grown, in the matter of preferential payment in any competition with the subject, to the general statutory scheme introduced by the Companies Act for the distribution of assets in a winding-up. To carry this to its logical conclusion, it is, we think, a necessary implication that the intention of the Legislature is that the Grown shall conform to the general scheme for the distribution of assets, except to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the means provided in the liquidation. Those proceedings which are not void, or are expressly saved from being void, may still be stopped under Section 171 from being continued. Indeed, they could not be stopped from being continued, if they were already void. In our view, Section 232 has nothing to do with Section 171, nor with the question before us. It simply says that certain proceedings shall be void, but that, if they are by the Government, they shall not be void. Very well : Assuming that the class of proceedings we are considering is not made void under Section 232, this simply means that it remains for us to consider under Section 171 whether it shall go on. If it had been avoided by Section 232, there would have been no necessity to consider under Section 171 whether it should continue; and in considering under Section 171 whether it should be "proceeded with," we are certainly not declaring any attachment, distress or execution to be void. The conclusion we have reached, therefore, is that, subject to the final question whether a revenue proceeding taken pursuance of Section 46 of the Indian Income-tax Act, 1922, is an "other legal proceeding" at all within the meanin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....first to obtain leave under Section 171 of the Companies Act. In a sense, therefore, this was a stronger case for bringing the suit within the terms of Section 171 than the case before us, since it must be admitted that a suit under Order 21, Rule 63, partakes prima facie more nearly of the character of a "suit" than the steps taken under Section 46 of the Income-tax Act with which we are now dealing. The construction placed by the Full Bench of the Lahore High Court on Section 171 of the Companies Act is expressed thus by the learned Judges at page 765 of the Report. After setting out the language of Section 171, they say : "The terms of this section are clear and imperative. They create an absolute bar against the commencement, or continuance of a suit or other legal proceeding against the company, except with the leave of the Court. Neither the word 'suit' nor the expression 'legal proceeding' is, however, defined in the Companies Act, the Civil Procedure Code or the General Clauses Act. They have different meanings in different statutes according to the context, but there is no doubt as to their meaning in Section 171. As stated in Section 26, Civil Procedure....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est by will to A of "a chair or other piece of furniture out of my sitting room to be chosen by him." Here clearly a chair is a piece of furniture and being a piece of furniture, must necessarily be of the same "genus" as any other piece of furniture. There is no room here for the ejusdem generis rule. Now take a bequest to A of "a chair or other chattel out of my sitting room to be chosen by him." Here the case is quite different. A chair, it a true, is a chattel, but there are many chattels which are not furniture and are not of the same "genus" (i.e., furniture) as chairs ; as, for example, books. Here the ejusdum generis rule may possibly apply to limit the construction of the word "chattel" in the context to something of the same "genus" as a chair, i.e., furniture. Applying this reasoning, therefore, to the words of Section 171, the first thing to observe is that the words are "suit or other legal proceeding" and not "suit or other proceeding," which it is interesting to notice, were the words of the Companies (Consolidation) Act, 1908y and are the words of the Companies Act, 1929. The word "legal" has been added in the Indian Act to give further definition to the word "proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the protection of Section 171 to a relatively narrow and arbitrary kind of legal proceedings of the limited class suggested by the Lahore High Court. The case of Hood Barrs v. Cathcart' s case (supra) which was approved in the House of Lords in Hood Barrs v. Heriot 's case (supra) referred to in the Lahore case does not appear to us to have any real bearing on the construction of Section 171 of the Indian Companies Act. The words under construction in these cases were contained in Section 2 of the Married Women's Property Act, 1893, and were "In any action or proceeding now or hereafter instituted by a woman.... the Court ......... shall have jurisdiction .... to order payment of costs "The appellant in each case was the defendant to an action, and the point was whether an appeal by her in an action to which the married woman was a defendant was an "action or proceeding .... instituted." The emphasis was through-out laid on the word "instituted" and it was held that it was not. Lord Herschell says : "Unless the proceeding is one which initiates litigation, it seems to me that it is not a 'proceeding within the true intent and meaning of the clause......" The words....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceeding," there would seem to be considerable authority for a wide construction of the word "proceeding." In In re Briton Medical and General Life Assurance Association [1886] 32 Ch.D. 503 it was held that a summons in a police Court against a company to recover penalties for alleged offences under the Companies Act, 1862, and the Life Assurance Companies Act, 1870, was a "proceeding'' within the meaning of the expression contained in Section 85 of the Companies Act of 1862, "...in any action, suit, or proceeding against the company." In In re Artistic Colour Printing Company [1879-80] 14 Ch.D. 502 Sir George Jessel expressed the view that execution under a judgment in an action would be included within the expression contained in Section 87 of the Companies Act, 1862, "no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court'"; and in In re Perkins Beach Lead Mining Company [1877-78] 7 Ch.D. 371, Vice-Chancellor Bacon held that an execution perfected by seizure before the commencement of the winding-up was a "proceeding'' within the meaning of the same section of the Companies Act, 1862.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om him. This is not an exhaustive description of the proceedings for the collection of arrears of land revenue, but it is perhaps sufficient to indicate their general character. It has, moreover, to be specially noticed that Section 46 of the Indian Income-tax Act, as amended in 1933, particularly gives the Collector for the purpose of recovering arrears of tax all the powers of a Civil Court in relation to attachment and sale. The question now is whether the proceedings so established can be properly described as "legal proceedings,'' bearing in mind that, if the construction of Section 171 which we have adopted is the correct one, they need not necessarily be limited to that narrow class of legal proceedings which are strictly ejusdem generis with a "suit." Regarded in this way, we think that proceedings under the Land Revenue Act are "legal proceedings." They may not be proceedings of a judicial nature, but they are, we think, nevertheless legal proceedings (see Section 199 of the Land Revenue Act). We appreciate that, in speaking of legal proceedings, we must not confuse the word "legal" with the word "lawful", which is quite a different thing. Lawful they certainly are....