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TMI Blog2016 (6) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ions taken out by the learned Official Assignee. 2. Heard Mr.N.V.Balaji, learned counsel appearing for the Official Assignee, Mr.J.Narayanaswamy, learned Standing Counsel for the second respondent and Mr.M.Swaminathan, learned Standing Counsel for the third respondent. 3. A lady by name T.R.Bhuvaneswari, who was a partner in a firm that owned a cinema theatre, was adjudged as an insolvent and her share in the partnership firm and in the properties were brought to sale by the learned Official Assignee. Out of the sale proceeds, the Official Assignee set apart one portion representing capital gains tax. 4. Thereafter, the Official Assignee came up with three applications in A.Nos.28, 29 and 32 of 2015 before the Insolvency Court. The praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest and/or penalty, the Official Assignee should approach only the Central Board of Direct Taxes or whether the Official Assignee can get appropriate orders under Section 7 of the Presidency Towns Insolvency Act, 1909 or not. 9. Section 7 of the Act 3 of 1909 reads as follows : "Power of Court to decide all questions arising in insolvency : Subject to the provisions of this Act, the Court shall have full power to decide all questions or priorities, and all other questions whatsoever. whether of law or fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable, if he failed to set apart an amount, which may become due and payable by a company in liquidation to the Income Tax Department. 13. In S.V.Kondaskar, O.L. and Liquidator of the Colaba Land & Mills Co. Ltd. (in liquidation) Vs. V.M.Deshpande and another [(1972) 83 ITR 685], the Supreme Court held that income tax is a debt, which has to rank pari pasu with other debts. The Supreme Court also held that Liquidation Court is not vested with the power to start assessment proceedings for determining the tax liability. The Court further held that no leave is necessary to be obtained from the Company Court for holding assessment or re-assessment proceedings. 14. But, the above observations were made subject to a caveat in paragraph 22 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up court for commencing or continuing assessment or reassessment proceedings." 15. Therefore, while there is no impediment for a Statutory Authority like an Assessing Officer to perform the statutory duty imposed upon him, the question of distribution of the sale proceeds of the assets of the company in liquidation or the assets of the insolvent, is vested only upon the Official Liquidator or the Official Assignee, as the case may be. The Official Liquidator functions within the control of the Company Court and the Official Assignee functions and discharges his duties within the control of the Insolvency Court. 16. Unfortunately for the Department, Section 178 deals only with the obligation on the part of the Official Liquidator to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of waiver could also be considered by the Insolvency Court itself. In case where surplus funds are available, the Company Court distributes such surplus funds to the promoters. Similarly, the Insolvency Court distributes surplus funds to the insolvent or his or her legal heirs. But at that time, the Company Court can as well say that these surplus funds should be paid only towards discharge of the liability on account of interest and/or penalty. 19. With that leverage in mind, we are of the considered view that this question of waiver can be decided by the Insolvency Court itself without driving the Official Assignee to go before the Central Board of Direct Taxes depending upon the amounts of funds available with the Officia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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