1. This is an application by the Income-tax Officer, Company Circle, Bangalore, for an order admitting the claim of Rs.1,44,678.36 against the company in winding up and for a direction to pay the same as a preferential claim.
2. The amount claimed is the total tax liability for two assessment years 1954-55 and 1955-56. the assessment order in respect of the former was passed on March 10, 1959, and that in respect of the latter on March 27, 1962. Action was also taken for recovery under section 46(2) of the Income-tax Act of 1922 in October, 1959, and a certificate for recovery through the Deputy Commissioner was issued on December 19, 1960, followed later by a letter dated April 9, 1963, to recover the entire amount claimed in this application.
3. The company was ordered to be wound up by this court on July 6, 1964.
4. So far as the amount of the claim itself is concerned, there can be no doubt about its accuracy because it is covered by orders of assessment. There appears to have been an appeal in regard to the earlier of the assessment orders, and the amount claimed is the amount as settled by the appellate order.
5. The only question, therefore, is whether the applicant is entitled to preferential payment of this amount under section 530 of the companies Act of 1956. The relevant portion of that section is clause (a) of sub-section (1), which reads :
'In a winding up, there shall be paid in priority to all other debts- (a) all revenues, taxes cesses and rates due from the company to the Central or State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8) and having become due and payable within the twelve months next before that date.'
From the facts already summarised by me, the amount of tax now claimed had become both due and payable and must be held to have become due and payable before action for recovery under section 46(2) of the Income-tax Act of 1922 was commenced.
6. Prima facie, therefore, the claim cannot be said to have become due and payable within twelve months next before the relevant date, i.e., the date of winding-up, July 6, 1964.
7. Reliance was sought to be placed on a ruling of the Patna High Court in In the Matter of Bihar Bolts and Rivets and Engineering Works (In Liquidation). (1)(1959)29 Comp.Cas.482. The tax dealt with there was sales tax and the question was whether the tax claimed was within the ambit of section 530(1)(a) of the Companies Act. It appears to have been argued that the tax had not become due within twelve months next before the winding up though it might be said to have become payable within that period. the argument was rejected with the following observations :
'Mr.Shreenath Singh has contended that the amount of Rs.7,934-1-0 due to Sales-tax department is not entitled to priority because it did not become due during the period of twelve months next before the relevant date. I am of opinion that this contention is without substance. Section 530(1)(a) of the new Act does not require that a claim must become due as well as payable within the period of twelve months. In my judgment its requirements are satisfied if the co-existence of both occurs for the first time within the period. Even if the amounts of sales tax for the three years in question were due from before the period of twelve months, they were not payable previously. As they first became payable within that period having already been due from before I hold that the entire amount of Rs.7,934-1-0 ought to be treated as a preferential claim and to be paid in priority to ordinary debts.'
8. The question whether the said interpretation of the sub-section is quite accurate or may require further scrutiny need not be gone into in this application because upon facts the income-tax claimed in this application had become both due and payable long before the period of twelve months immediately preceding the winding-up order.
9. Another argument advanced is that it is sufficient for purposes of the clause that the tax remains unpaid within the said period of twelve months, although it might have become due and payable even prior thereto. I do not think that such a construction can at all be accepted, because to do so would be to cease to give effect to the stipulation of the period in the section. If tax which had become due any time before the winding-up order but has remained unpaid on that date was intended to be given the benefit of a preferential payment by the law, it would be unnecessary for the statute to mention that for purposes of acquiring priority the said tax should have become due and payable within twelve months next before that date. The fact that it remains unpaid is the very reason for the claim because, if it had been paid, there would have been nothing in respect of which a claim would have been made. From any point of view, therefore, this interpretation cannot be accepted.
10. There is reference made in the prayer itself to section 178 of the Income-tax Act of 1961, but I do not see any relevancy for that reference because that section of the Income-tax ACt contemplates an issue of notice to the official liquidator and deals with certain consequences flowing therefrom. There has not been any such notice in this case and therefore there can be no argument capable of being addressed on the basis of the said section.
11. The rule as to priorities in section 530 of the Companies Act also does not seem to be a matter governed or to any extent affected by section 178 of the Income-tax ACt, 1961, for the simple reason that the two sections deal with two different topics and therefore no occasion could arise for the operation of the non obstante clause contained in sub-section (6) of section 178 of the said Act.
12. I therefore make an order admitting the claim of the Income-tax Officer against the company in winding up in respect of arrears of income-tax amounting to Rs.1,44,678.36 as an ordinary unsecured debt ranking pari passu with other unsecured debts.