TMI Blog1967 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... quidation for the assessment years 1950-51 to 1955-56. The facts necessary for the purpose of this application are that the Colaba Land and Mills Co. Ltd. was ordered to be wound up, and the applicant was appointed liquidator by this court by its order dated 7th October, 1959. The entire undertaking of the Colaba Land and Mills Co. Ltd. had been sold on 21st May, 1958, and all the records (except the financial books) of the undertaking maintained by the company had been handed over to the purchasers for the purposes of running and working the said undertaking. On 23rd August, 1966, the Income-tax Officer served on the official liquidator, who is the applicant before me, notices under section 148 of the Income-tax Act, 1961, proposing to re-open the assessment of the company and to reassess the company in respect of the assessment years 1950-51 to 1955-56. Copies of those notices have been annexed to the affidavit in support of the present judge's summons and collectively marked "C". On 31st December, 1966, the Income-tax Officer served further notices under section 142(1) of the Income-tax Act, 1961, upon the official liquidator, calling upon him to produce the accounts and docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, he may, subject to certain formalities provided for by the Act, reassess the same. Section 148 of the Act, however, provides that, before doing so, the Income-tax Officer must serve on the assessee a notice containing certain requirements which are laid down in another section of the Act. Section 446 of the Companies Act, 1956, with the interpretation of which I am directly concerned on the present summons, provides, in sub-section (1) thereof, as follows : "When a winding-up order his 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." Sub-section (2) of that section then proceeds to enact that the court which is winding up the company is to have jurisdiction to entertain and dispose of any suit or proceeding by or against the company and certain other matters laid down therein "notwithstanding anything contained in any other law for the time being in force". Sub-section (3) of section 446 provides that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure provided by section 46 of the Income-tax Act, 1922, in regard to the recovery of income-tax as arrears of land revenue, and forwarded a recovery certificate under sub-section (2) of that section to the Collector of Allahabad. On the 10th of July, 1944, the official liquidator received from the Collector a demand for the recovery of the said amount as arrears of land revenue. On these facts, the official liquidator made an application to the High Court, inter alia, under section 171 of the old Indian Companies Act, 1913, which is identical in terms with section 446(1) of the present Companies Act of 1956, against the Governor-General for an order that the respondents be directed to put in a formal claim to the official liquidator, and for an injunction restraining the Collector from effecting recovery of the said sum as arrears of land revenue, pending disposal of the application. A Division Bench of the Allahabad High Court, before whom the application came up for hearing held, inter alia, that the respondent should be restrained from proceeding, without the leave of the court, with the subsisting proceeding before the Collector of Allahabad for recovery of the sum claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those words, and they should be held to cover distress and execution proceedings in the ordinary courts, as such proceedings are other legal proceedings against the company as contrasted with ordinary suits against the company. On the same page, the learned judges then proceeded to state as follows : "That still leaves open the question whether action under section 46 of the Indian Income-tax Act is covered by the phrase 'other legal proceeding'. Clearly it is not a proceeding in an ordinary court of law. But we see no reason why in British India no 'legal proceeding' can be taken otherwise than in an ordinary court of law, or why a proceeding taken elsewhere than in in ordinary court of law, provided it be taken in the manner prescribed by law ind in pursuance of law or legal enactment, cannot properly be described as a 'legal proceeding'. If it be considered that the effect of the income-tax authorities putting the machinery of section 46 of the Income-tax Act in motion for the collection of arrears of income-tax is to bring into operation all the appropriate legal enactments relating to the collection of land revenue in the Province concerned, it is, in our judgment, very diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m setting off the refund against the tax dues, and directing him to hand over the balance to the official liquidator. The income-tax bench of the Bombay High Court, following the decision of the Federal Court in Shiromani's case cited by me above, set aside the orders passed by the Income-tax Officer holding that the provisions of section 49E were not available to the income-tax department, and directing the Income-tax Officer to dispose of the respondent's claim for refund and pass appropriate orders in respect of the same under section 48 of the Income-tax Act, 1922. That decision was confirmed on appeal to the Supreme Court. After quoting section 49E of the Income-tax Act, 1922, the Supreme Court observed as follows : "On the face of this provision, there is no doubt that this section is not subject to any other provision of law. But it will be surprising if this power can be exercised in such a way as to defeat the provisions of the Indian Companies Act." It may be mentioned that it was not denied by the Additional Solicitor-General before the Supreme Court that the State had no priority in respect of its claim for income-tax dues. The Supreme Court in its judgment then refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere authorised by law, there being no justification for limiting the meaning of that expression to proceedings in a court of law. Mr. Joshi, who appeared for the revenue authorities (respondents) to oppose the present application, has sought to distinguish both the above decisions on three grounds : (1) That the notices issued by the Income-tax Officer are not "legal proceedings" at all within the terms of section 446(1). Mr. Joshi has contended that it is only after the reassessment proceedings are completed and steps are taken to recover the additional tax, if any, that may be found due, that they become "legal proceedings" within the terms of that section. Mr. Joshi has based this contention of his on a decision of the Allahabad High Court in the case of Tika Ram and Sons Ltd. v. Commissioner of Income-tax to which I will presently refer. (2) That, assuming the reassessment proceedings started by the notices in question are "legal proceedings", they do not fall under section 446 because the Income-tax Officer alone has exclusive jurisdiction to make the reassessment and to determine the tax liability, if any. In support of this contention, Mr. Joshi has relied on the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 1956. In regard to the first question, it was held that the revenue department was not a creditor and could not have proved its claim in the liquidation proceedings before the court, since the assessment had not yet been completed. Though Mr. Joshi has sought to rely upon the decision of Manchanda J. on this question also, I do not think I am concerned at all with the same in the present application, and I do not, therefore, propose to deal with the judgment of the learned judge on that point. The learned judge then proceeded to deal with the second question that arose before him. After quoting section 446(1) of the Companies Act, 1956, Manchanda J. proceeded to deal with the case-law on the point including the decision of the Federal Court in Shiromani's case already discussed by me above, and observed that the judgment of the Federal Court made it clear that the expression "other legal proceedings", so far as it relates to income-tax proceedings was confined to execution or distress proceedings, that is, action under section 46, which is a stage arising after the assessment has been completed. Manchanda J. then stated as follows at page 158 : "The ratio of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that proceedings for recovery under section 46 of the Income-tax Act cannot be taken without the leave of the company judge. Manchanda J., therefore, dismissed the writ petition filed by the company. I do not agree either with the construction placed by him upon the decision of the Federal Court in Shiromani's case by Manchanda J. in Tika Ram's case or with the construction placed by him upon the expression "other legal proceeding" in section 446(1) of the Companies Act. It is true that the question which arose before the Federal Court in Shiromani's case related to recovery proceedings under section 446 of the Companies Act, but the Federal Court has in unambiguous terms construed the expression "other legal proceeding" as including any proceeding taken in pursuance of a legal enactment which need not be in a court of law. I do not see how the distinction which Manchanda J. has sought to draw in Tika Ram's case can be drawn at all on a plain reading of the language of section 446(1) itself. In my opinion, recovery proceedings are proceedings which are as much under a legal enactment as assessment proceedings, and, in fact, both the proceedings would be proceedings under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d up on the 9th November, 1959. The question which arose was whether the Tribunal constituted under the Life Insurance Corporation Act would continue to have jurisdiction in regard to matters raised in a petition filed under section 15 of that Act even after the winding up order was made on 9th November, 1959. It was held that the provisions of section 41 of the Life Insurance Corporation Act, which provided that no civil court was to have jurisdiction to entertain or adjudicate upon any matter which the Tribunal constituted under that Act was empowered to decide, being a provision of a special Act, would override the provisions of section 446 of the Companies Act, which is an Act relating to companies in general. In so far as the decision is based upon that ground, I am afraid, it is inapplicable in considering the question as to which is the special Act and which the general statute as between the Companies Act and the Income-tax Act. The Supreme Court itself has in effect held in the case of Union of India v. India Fisheries Limited, that the Income-tax Act must be considered to be a general provision applicable to all assessees, whereas the Companies Act must be held to be a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clear from the judgment of the Federal Court in Shiromani's case, that ultimately the income-tax authorities would have to come in as ordinary creditors for rateable distribution in the winding-up. There is nothing in the judgment of the Federal Court in Shiromani's case to lead to the conclusion that the expression "other legal proceeding" should not be held to apply to cases in which proceedings have been taken under a special Act like the Income-tax Act which is a complete code in itself and under which the income-tax authorities are under a statutory duty to assess tax. Proceedings under such Act are, in my opinion, none the less proceedings taken pursuant to a legal enactment, and the statutory duty to which Mr. Joshi has referred also arises only pursuant to a legal enactment, and would, therefore, fall within the ratio of the decision in Shiromani's case. I, therefore, reject the second contention of Mr. Joshi also. That brings me to the last contention of Mr. Joshi in regard to the frame of the reliefs sought on the Judge's summons in the present case. Mr. Sorabji has, however, very fairly conceded that prayers (a) and (b) of the judge's summons are not properly framed, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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