TMI Blog1974 (3) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... any should be accepted as preferential claim and paid. The official liquidator by his order dated November 6, 1973, admitted the claim but declined to treat it as a preferential claim. Relying upon section 530 of the Companies Act, 1956, he held that the preferential claim is restricted to the amount due and payable within twelve months next before the date of the winding-up order. As the amounts were due 12 months prior to the winding-up order, the preferential claim was rejected. Now, under section 530(1)(a) of the Companies Act, 1956 (hereinafter called " the Companies Act "), the Government is entitled to priority' in respect of arrears of tax owing by a company in liquidation but priority is confined to tax which had become due and payable within 12 months next before the date of the winding-up order. And it is plain that a tax is due and payable only when it has been ascertained, quantified and notified to the assessee with a demand for payment. It is perhaps relevant to notice that before the Companies Act was enacted, a Company Law Committee was constituted. In paragraph 219 of their report, the Committee said: " In this connection we should like to refer to a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes." It is because of this advise of the Committee that section 530(1)(a) seems to have been enacted. According to this provision, the Government is not entitled to any prerogative, priority or preferential right or treatment, in the administration of assets in the liquidation of a company, save those which are expressly conferred and limited by the provision itself as stated already. If this section had stood alone, there would have been no difficulty in rejecting the claim of the Income-tax Officer solely on the ground that the amount he is claiming had become due and payable long before the 12 months next prior to the date of winding-up order as the liquidator has done. We have, however, to consider section 178 of the Income-tax Act. This section was introduced in 1962. Under section 178(3) the liquidator of any company which is being wound up, whether under the order of a court or otherwise is bound, within 30 days of his appointment, to give notice to the Income-tax Officer, who in his turn is bound within three months to intimate to the liquidator the estimated amount of the liability of the company. Until the liquidator has set aside an amount to meet the tax li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lume 6, page 121, " to set apart or apply to a particular purpose ". What must follow is that when the liquidator sets aside the notified amount it is intended for the specific purpose of that amount to be paid to the Income-tax Officer who has notified the amount. The liquidator was not able to point out to us as to what otherwise happens to the amount after it is set apart by him. He conceded that such an amount cannot be distributed to the creditors. It is not available for distribution. If that is so, then it has to be appropriated towards the tax due for which purpose the amount was required to be set aside. We do not think that the legislature which had the knowledge of the Company Law Committee's report extracted above and of the existence of section 530(1)(a) of the Companies Act, would have legislated for setting aside the notified amount without having an intention to appropriate the amount towards the tax dues. It is true that section 178 of the Income-tax Act does not refer to preferential payment. Nor it says that the tax claim of the Government will have priority over the other creditors. Nevertheless, the effect of section 178 of the Income-tax Act undoubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 530(1)(a) of the Companies Act gives a limited priority to the Government. It, by implication, means that the Government should stand in the queue with other unsecured creditors to receive the pari passu distribution of the assets of the company. Section 178 of the Income-tax Act which is a subsequent legislation on the same subject, however, casts an obligation on the liquidator to set aside not only the restricted amount of tax referred to in section 530(1)(a) of the Companies Act but the entire amount of tax due for the purpose of its payment. The subsequent legislation, therefore, submerges the effect of section 530(1)(a) of the Companies Act. The result of the subsequent legislation is the implied repeal of section 530(1)(a) of the Companies Act, which provided only for a limited relief for the tax due, and which now has been replaced in altogether a different form but having the effect of setting aside the entire amount of tax due for the purpose of its payment. It is not in dispute that the repeal can either be express or it can be implied. It is well settled that if the provisions of a later enactment are so inconsistent with or repugnant to the provisions of the earli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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