TMI Blog1961 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial liquidator. The petitioner company was directed to be wound up by an order passed by this court on 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, to be exercised by him under section 180 without sanction or intervention of the court save and except in case of sales of immoveable property belonging to the petitioner. The petitioner's assessment for the year 1948-49 was completed on December 8, 1950, and the petitioner was assessed to pay a tax of Rs. 8,737-15-0. Since, before this date the petitioner had gone into liquidation, the Income-tax Officer lodged a claim with the official liquidator on or about March 15, 1951. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer, the petitioner filed an application in revision to the Commissioner of Income-tax. On September 21, 1959, the said application was rejected by the Commissioner, holding that the action of the third respondent was perfectly justified under the provisions of section 49E of the Income-tax Act. Thereafter, on November 25, 1959, the petitioner has filed the present application under article 226 of the Constitution, and has prayed for a writ, direction or order for setting aside the order of the third respondent purporting to set off the refund due to the petitioner against the tax dues, and the order of the second respondent confirming the action of the third respondent, and also for a further writ, direction or order restraining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch provisions was the provision of section 49E of the said Act. The provisions of this section applied to every person which included even a company in liquidation like the petitioner. According to the Department, therefore, the action taken by the Department was perfectly legal and proper and was not either in breach of or contrary to the provisions of the company law. Mr. Sorabjee, learned counsel appearing for the petitioner, has argued that the Crown does not have any priority in respect of its claims in the liquidation of a company except as is provided in section 230 of the Indian Companies Act, 1913, which was applicable at the material time. Now, the present claim of the Income-tax Department has been already adjudged and certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of an unsecured creditor, the machinery provided under the Income-tax Act for the recovery of the income-tax dues is not available to the Department. This is the view which has been taken by the Federal Court in the case of, Governor-General in Council v. Shiromani Sugar Mills Ltd. [1946] 16 Comp. Cas. 71 . It was held in that case that "in the winding up of a company the Crown is not entitled to any priority, prerogative or preferential treatment except to the extent provided for in the Indian Companies Act, in particular, by sections 230 and 232." In that case, after the winding up order against the company had been made by the High Court in April, 1942, a notice of demand was served on the official liquidator by the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their Lordships observed that if the machinery of section 46 were made available in respect of such claim, it would, in effect, enable the Crown to secure for the arrears, the very priority to which both in England and in India the Crown has been held not entitled. Mr. Sorabjee has argued that although this decision refers to the case of a recovery, the ratio of this case is equally applicable to the case of a set-off under section 49E of the Indian Income-tax Act. The provisions of section 49E which empower the Department to set off is a provision enabling them to have their dues satisfied, and would thus have the effect of permitting the Department to have its claim as an unsecured creditor satisfied to the full extent in preference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of section 49E was available to the Department in the present case to set off the payment of the advance tax to the tax which has remained payable. In our opinion, the argument advanced by Mr. Joshi is not tenable. It is true that a demand of Rs. 8,737-15-0 which was made in respect of the tax for the year 1948-49 was a tax demanded. In view of the supervening insolvency, however, this demand ranked as the claim of an unsecured creditor, and on its being so adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the official liquidator to the Department. This claim thereafter was governed by the provisions of the company law and could be paid to the creditor only in accordance with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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