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Issues:
Application under s. 391(6) and s. 443 of the Companies Act seeking restraint on sales tax authorities from levying penalty and charging interest. Analysis: The petitioner-company, engaged in car distribution, faced financial distress leading to a winding-up petition. A scheme of arrangement was proposed to repay creditors over ten years, excluding penalties and interest under various laws. Sales tax assessments were pending, with fears of heavy penalties due to the proposed scheme. The sales tax department objected, citing lack of court jurisdiction and past defaults by the petitioner. The court deliberated on its jurisdiction to stay assessment, penalty, and interest proceedings under the Sales Tax Act. It differentiated between s. 391 and s. 446 of the Companies Act, asserting jurisdiction to stay taxation proceedings. The court rejected comparisons to a Supreme Court ruling on income tax proceedings, emphasizing the distinct nature of the present case under s. 391(6). It clarified the scope of s. 391(6) to include proceedings under special acts like taxation laws. While no stay was granted on assessment proceedings, the court considered staying penalty proceedings crucial to uphold the proposed scheme's integrity. Despite inaccuracies in the petitioner's claims, the court prioritized creditor interests, staying penalty proceedings for pre-1980 assessment years. Regarding interest, the court acknowledged its automatic levy under the Sales Tax Act but opted to stay its recovery to support the petitioner's financial stability. A payment proposal by the petitioner was considered, mandating monthly payments towards arrears and current liabilities. The court conditioned the stay on timely payments, warning of automatic vacation if conditions were breached. The judgment concluded with each party bearing its costs. In summary, the court asserted jurisdiction to stay penalty and interest proceedings under the Sales Tax Act, prioritizing creditor interests and financial stability in granting the stay subject to payment conditions.
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