TMI Blog1980 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... As a result on October 6, 1966, the ITO demanded from the company the payment of this amount, but to no effect. On January 16, 1969, an application was moved for winding up the company. An order of winding up was passed on May 7, 1969. On February 24, 1971, the ITO requested the official liquidator for payment of Rs. 44,000 due on account of deductions made from the salary of Arora. The official liquidator by his letter of March 1, 1971, asked the ITO to obtain leave of the High Court under s. 446 of the Companies Act, before any payment could be made by him. It was apparently this which made the ITO on July 25, 1972, to move an application under s. 446 of the Companies Act, seeking leave to take proceedings under the provisions of the I.T. Act for the recovery of the aforesaid amount. It was at this stage that the issue was joined as to whether leave should be granted. The learned judge has refused to grant leave and hence the appeal by the ITO. Section 446(1) of the Companies Act provides that when a winding-up order has been made and an official liquidator appointed no suit or other legal proceedings shall be commenced or shall be proceeded with except by leave of the court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 (FC), wherein it was observed: " Accordingly, we agree with the learned judges of the Allahabad High Court in holding that the words 'other legal proceeding' in section 171 of the Indian Companies Act, 1913, comprise any proceeding by the revenue authorities under section 46(2) of the Indian Income-tax Act and that accordingly before forwarding the requisite certificate under section 46(2) to the Collector, which would put the machinery for the collection of the arrears of income-tax as arrears of land revenue into motion, the appellant should have applied in the liquidation under section 171 of the Companies Act for leave of the winding-up court. " It may be noted that s. 46(2) of the Indian I.T. Act, 1922, corresponded to s. 222 of the present I.T. Act. The attempt to avoid the applicability of s. 446 of the Companies Act by the counsel for the revenue by importing s. 537(2) to his aid is of no avail in view of the Federal Court decision wherein, though reference was made to s. 232(1) and (2) of the Indian Companies Act, 1913 (corresponding to s. 537 of the Companies Act, 1956), it was nevertheless held that leave of the court has to be obtained. Reference in this connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding-up and the passing of the winding up order. Section 537 is covering, a period in between this interval, because it clearly says that where any company is being wound up by court any attachment, distress or execution put in force, without leave of the court, after the commencement of the winding-up, or any sale held, without leave of court after such commencement shall be void. Section 537(1), therefore, only makes all such transactions void between the date of presentation of petition for the winding-up and the date of winding-up order. The reason why nothing more need to be said under s. 537(1) is that by virtue of s. 446 of the Companies Act the moment the winding-up order is passed no legal proceedings shall be commenced or if pending on the date of the winding-up order shall be proceeded with against the company except by leave of the court. That, however, left out the transactions earlier to the passing of the winding-up order. This is covered by s. 537(1) of the Companies Act. Thus, right from the date of presentation of a petition for winding up, the courts' protective arm is thrown on all transactions so that private individuals may not take undue advantage of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its requirements. We may also note that Mr. Verma tried to invoke s. 178 of the I.T. Act. The first objection to permitting this contention being raised is that this point was never raised before the learned single judge who, therefore, had no occasion to deal with it. Not only that, even in the grounds of appeal no such ground has been raised on the basis of this provision. That apart, even on merits, in our view, the argument is also of no assistance to Mr.Verma. Section 178 empowers the ITO on receipt of information from the liquidator about his having been appointed as a liquidator of a company to inform the liquidator of the tax liability and also to direct him to keep sufficient funds to provide for any tax which is likely to be payable by the company and the liquidator shall not, without leave of the Commissioner, part with any of the assets, equal to the amount notified. This provision in no way interferes with or abrogates the provision of priority of the debts laid down in s. 530(1)(a) of the Companies Act [See Baroda Board Paper Mills Ltd. v. ITO [1976] 102 ITR 153; 46 Comp Cas 25 (Guj)], where it was held that the non: obstante clause of s. 178(1)(b) of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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