TMI Blog1990 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2, 1976. Subsequently, the company was entrusted to the Kerala State Industrial Enterprises Limited, a holding company. While the company was functioning as a relief undertaking, the company was acquired by the Government under the Super Clays and Minerals Mining Company (Private) Limited (Acquisition of Undertakings) Act, 1983 (hereinafter called the "Acquisition Act"). By reason of the notification issued under the Acquisition Act, the petitioner became the owner of the company with effect from November 5, 1983., From 1983 onwards, the Income-tax Department has been making various efforts to collect the income-tax dues and the interest that had accrued on the income-tax arrears. When exhibit P-5 was sent to the petitioner demanding income-tax arrears for the assessment year 1974-75 together with interest, the petitioner sent exhibit P-6 reply taking the stand that, under section 7(4) of the Acquisition Act, the Government of Kerala has to pay the amount which is an unspecified liability and that the company is not liable to pay it. Then exhibit P-7 was addressed by the first respondent to the Government. The Government gave exhibit P-8 reply claiming that it is not liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef Undertakings Act, unless the notification is extended, there is no moratorium, and under the 1962 Act, the maximum period contemplated is only five years. The Income-tax Act is not one of the Acts included in the Schedule to the Relief Undertakings Act, Act 6 of 1962. The petitioner had taken over all the assets of the fourth respondent along with the liabilities. It is bound to pay the tax due. Income-tax is a charge on the company and it will run on the assets. The petitioner cannot evade responsibility for payment of the income-tax and the interest accrued thereon. The petitioner, being a successor-in-interest, is bound to discharge the tax liability. The stand taken by the Kerala Government as well as the petitioner is untenable. The clarification given by the Government of Kerala that it has no responsibility to discharge any liability of the predecessor-company is not correct. Though the Commissioner of Payments was approached, he did not send any reply to the notice issued to him. In view of the attitude adopted by the petitioner and the Kerala Government, the Tax Recovery Officer is entitled to realise the arrears and he rightly proposed to attach the bank account and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Relief Undertakings Act is only recovery of the amount, but there is no statutory bar to the interest accruing under section 220(2) of the Income-tax Act. Here, the petitioner is a successor-in-interest. It has taken over the company with all its assets and liabilities. It is bound to pay the amount. The State Government and the petitioner were dodging payment by trying to pass on the responsibility from one to the other. The Tax Recovery Officer is fully justified in threatening to take coercive steps as indicated in exhibit P-12. The point for consideration is whether exhibit P-12 is liable to be quashed. The point : If we examine the various documents filed along with the original petition, we find that the parties proceeded on wrong premises and their anxiety was to evade liability. The petitioner was trying to shift the responsibility to the State Government, and the State Government was disowning the responsibility taking shelter under section 7(4) of the Acquisition Act. The petitioner was also trying to seek protection against recovery under the Relief Undertakings Act. I shall now examine the legal position and the correctness of the stand taken by the differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court is not going into the controversy whether the notifications under the Relief Undertakings Act were properly extended or not Exhibit P-2 is the notification issued under section 4 of the Relief Undertakings Act. As the protection given under the Relief Undertakings Act expired before issuing exhibit P-12, it is unnecessary for this court to go into the question of the extension of the notifications issued under exhibits P-1 and P-2. Exhibit P-3 is the Special Acquisition Act enacted for bringing into existence the petitioner-company. Under the scheme of this Act, section 3 contemplates transfer and vesting in the Government of the undertakings of the company. Section 4 gives the general effect of vesting. Clause (a) of sub-section (1) of section 4 specifies what are all the assets which would vest under this Act. Section 5 clearly lays down that the Government is not to be liable for certain prior liabilities. The section reads as follows : "Government not to be liable for certain prior liabilities. No liability incurred by the company before the appointed day, for the contravention of any provision of law for the time being in force, shall be enforceable against the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are mentioned in the Schedule to the Act. Sub-section (4) deals with unspecified liabilities. While the specified liabilities are to be discharged from the amount referred to in sub-section (1) in accordance with the rights and interests of the creditors of the company, with regard to the unspecified liabilities, the Government shall discharge them as and when they fall due for payment. Taking advantage of the language of sub-section (4) it is being contended by the petitioner that the Government has the liability to pay the amount. At the same time, the Kerala State Government claims that its liability is only to the future unspecified liabilities, and not to the past liabilities. The proviso to section 7 makes it clear that the liability assumed by the Government shall not exceed the amount shown in the audited balance-sheet of the company as on December 31, 1975. It is interesting to see that, under the Schedule to the Act, "paid up capital of the company", "sundry creditors as per the audited balance-sheet", "other liabilities as per the audited balance-sheet", and "unsecured loans as per the audited balance-sheet" alone are mentioned. The income-tax dues are not at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government is not bound to pay liabilities which arose prior to the date of vesting, and under section 7(4), the Government is liable only for unspecified liabilities which arise in future. On the basis of exhibit P-9, clarification given by the Government, the petitioner sent a detailed reply dated December 31, 1986, to the first respondent. In this, it is reiterated that the liabilities vested with the Government do not include the liability to pay income-tax. But, at the same time, the letter admits that the liabilities of the company shall stand transferred to and vest in the Government or Government company. Then, after making reference to the amount entrusted with the Commissioner of Payments and to section 7(4), it is stated that the Government is liable only for future liabilities, and as Super Clays and Minerals Mining Company (P.) Ltd. is still in existence, the Tax Recovery Officer may proceed against the fourth respondent. It is interesting to see that in exhibit P-10 also, section 6 is overlooked and the reply is drafted overlooking section 6 of the Acquisition Act and the transfer of liabilities to the Government company. As a consequence of exhibit P-10, the first re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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