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TMI Blog1977 (3) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... order was rectified by the Income-tax Officer and a revised tax demand to pay Rs. 97,037 was served on the company. This assessment was considered to be legally unsustainable by the official liquidator and so he filed an appeal. Pending that appeal the official liquidator requested the Income-tax Officer to stay the collection of tax under demand. But the Income-tax Officer directed the payment of Rs. 40,000 within the due date and gave time till June 30, 1975, or the date of the disposal of the appeal whichever is earlier to pay the balance. This sum of Rs. 40,000 was paid on April 8, 1975. After that the liquidator submitted a report to the court for ratification of the said payment and for stay of collection of the balance demand till th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributing the dividend (see Income-tax Officer v. Official Liquidator [1978] 111 ITR 77 ; 48 Comp Cas 11 (Ker)). The Division Bench gave one month's time to pay the tax demand. But since there was some other difficulty in getting back the amounts previously invested in the fixed deposits the balance tax of Rs. 33,187 was remitted by the liquidator only on September 1, 1976. The Income-tax Officer by his order passed on September 20, 1976, has charged a sum of Rs. 6,228 as interest payable under section 220(2) of the Income-tax Act and a demand was made on the liquidator to pay the sum on or before October 26, 1976. By the present report the liquidator submits that there has not been any default in the case, because there was an order of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act dated September 20, 1976, is in the following terms : " For the assessment year 1973-74 an amount of Rs. 1,00,759 was due from the assessee on or before March 23, 1975, as per the demand notice issued on 17-2-1975. Subsequently the demand was reduced to Rs. 73,187. But the assessee has paid the demand only in instalments on 7-5-1975 and 7-9-1976. As there is delay in making the payment an amount of Rs. 6,228 is charged as interest u/s. 220(2). They should be paid as per demand notice and challan enclosed." Section 220 to section 232 of the Act relate to the collection and recovery of tax. Section 220(1) requires the assessee to pay the tax demanded within a period of 35 days mentioned in the notice of demand. Sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emanded will be included as expenses of winding up. But, when it comes to the question of payment of interest on the tax demand, it is for the court to decide whether this should be paid or not. That will be a matter depending on the facts and circumstances of each case. The Supreme Court had occasion to consider the power of the liquidation court to scrutinise the claim of the revenue in respect of assessment and recovery of income-tax. In Kondaskar, Official Liquidator v. Deshpande, Income-tax Officer [1972] 83 ITR 685, 699 ; 42 Comp Cas 168, 181 (SC) it is observed thus : " We have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay in getting the sanction of the court will cause loss to the company in liquidation, it will be interfering with the power of the court to issue directions regarding the distribution of assets of the company. So, the Income-tax Officer should obtain the sanction of the court or move that court that the claim for interest under section 220(2) of the Income-tax Act may be considered and orders passed in respect of it. Demand to pay the amount without observing this requirement of section 446(2) and (1) makes the demand unenforceable against the company in liquidation. It follows that the demand to pay Rs. 6,220 as interest on the income-tax due is, for the above reasons, invalid and the Income-tax Officer is, therefore, restrained from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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