Jagannath Shetty, J.
1. The decision on the question raised in this writ petition depends upon the interpretation of section 179 of the Income-tax Act, 1961 (shortly called 'the Act').
2. The facts are these : Yeshwant Raghunath Bhide, the petitioner, was one of the directors of a company called the Bijapur Engineering and Auto-Works Private Ltd. It was incorporated as a private limited company under the provision of the Indian Companies Act, 1913. The company was carrying on its business for a couple of years and, thereafter, it is said that it landed in difficulties and it stopped its business. For the assessment year 1957-58, the company was assessed to income-tax under the provisions of the Indian Income-tax Act, 1922, on a total income of Rs. 2,933 and the tax assessed thereon worked out to Rs. 1,510.50. With a little assets remaining with the company, a portion of the tax was paid and the balance of Rs. 1,336 remained outstanding. The Income-tax Officer (Collection), Hubli, who is the respondent before me, finding that the arrears of tax could not be recovered from the assets of the company, called upon the petitioner in his letter dated 30th April, 1971, to pay the balance as he was an ex-director of the company and, therefore, liable to make good the payment under section 179 of the Act.
3. Interrupting the narration, I have to state one more fact : The Registrar of Companies came to know that the company was not doing business and was not in operation. He suo motu took action under section 560 of the Companies Act, 1956, to strike its name off the register. Thus, the company was struck off on June 16, 1964, and a notice of dissolution under section 560(5) of the Companies Act was published in the Gazette of India dated 4th July, 1964.
4. The petitioner contended before the respondent that he was not liable to pay the tax due from the company. Rejecting his contention, the respondent issued a letter dated 10th June, 1971, asking the petitioner to approach him with all the relevant records. Finding no other alternative, the petitioner has preferred the writ petition under article 226 challenging the recovery proceedings.
5. The principal contention urged by Sri. G. Sarangan, learned counsel for the petitioner, was that section 179 of the Act cannot be attracted to the facts of the present case. It is, therefore, necessary to set out the said section hereunder :
'179. Liability of directors of Private company in liquidation. - Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), when any private company is wound up after the commencement of this Act, and any tax assessed on the company, whether before or in the course of or after its liquidation, in respect of any income of any previous year cannot be recovered, then every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.'
6. The requirements of the said section are : (1) that the company should be a private limited company, (2) that the company should be wound up after the commencement of the Act, i.e., on April 1, 1962, and (3) that the tax assessed on the company should be found to be not recoverable from the assets of the company. It is open to the ex-director to prove that the non-recovery of such tax cannot be attributed to his gross neglect, misfeasance or breach of duty in relation to the affairs of the company. If he does not prove that, then he shall be jointly with others or individually liable for the payment of the tax.
7. Let me now see whether those conditions were satisfied before proceeding to recover the tax from the petitioner. The company in question was a private limited company. The petitioner was its director during the relevant accounting year. The tax due from the company could not be recovered from the assets of the company. But these alone are not sufficient to attract the liability under the said section. There is yet another condition to be satisfied, i.e., the company should have been wound up after the commencement of the Act and an opportunity should have been given to the petitioner to prove that the non-recovery of the tax cannot be attributed to his gross neglect, misfeasance or breach of duty in relation to the affairs of the company. That finding is yet to be given by the respondent. Probably for that purpose, he has asked the petitioner to meet him with all the relevant records. That question arises only if it is proved that the company was wound up after the commencement of the Act. Mr. Sarangan submitted that the company was not wound up, but only its name was struck off the register under section 560(5) of the Companies Act, and, therefore, section 179 of the Act was inapplicable to hold the petitioner liable for the payment of the tax due from the company.
8. The question narrows down to this. Whether the tax due from a private limited company which was struck off under section 560(5) of the Companies Act could be recovered from its past director under section 179 of the Ac
9. To understand what exactly is the meaning of the expression 'wound up', I have necessarily to refer to the provisions of the Companies Act. Section 425 of the said Act states that the winding-up of a company may be either, (a) by the court; or (b) voluntary; or (c) subject to the supervision of the court. It is a process by which the assets of the company are realised and its liabilities are paid. That process may be resorted to irrespective of the fact whether the company is solvent or insolvent. Section 560 of the Companies Act confers power on the Registrar to strike the names of defunct companies off the register. Where he has reasonable cause to believe that a company is not carrying on business or in operation, he may, after statutory notice calling upon the company to explain, strike the name of the company off the register and shall publish notice thereof in the Official Gazette and on the publication in the Official Gazette of the notice, the company shall stand dissolved. The consequences emanating from such dissolution of the company are set out under clauses (a) and (b) of the proviso to sub-section (5) of section 560 of the Companies Act. Sub-section (6) of section 560 provides for an application to the court by the company, a member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice of the fact of striking off the name of the company to be restored to the register, with such directions as it thinks fit for placing the company and all other persons in the same position as nearly as if the name of the company had not been struck off. Sub-section (7) of section 560 states that when such an order is made and delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off.
10. I have already stated that the winding-up is a process by which the assets of the company are realised and its liabilities are paid in accordance with the provisions of the Companies Act. But, if the name of a company is struck off the register, its undisposed of property is not appropriated towards its liabilities. Nobody would claim that property. It vests in the Crown as bona vacantia subject to its rights to disclaim. (See The Principles of Modern Company Law, 3rd edition, by L. C. B. Gower, page 652). A reference may be made to the decision of the Calcutta High Court in In re U. N. Mandal's Estate (P.) Ltd. P. B. Mukharji J. observed at page 498 thus :
'But even if there were any, the situation may not be so hopeless as was argued on behalf of the applicant. Even if there were any property, such property will not be without an owner. The doctrine of bona vacantia, I think, is attracted or will be attracted in that contingency.'
11. In view of these vital differences in the consequences emanating from the process of 'winding-up' and by the act of striking off the name of a company, it is difficult to hold that Parliament intended to cover the cases of companies whose names are struck off the register within the scope of section 179 of the Act. In construing fiscal statutes and in determining the liability of a subject to tax, the court must have regard to the strict letter of the law. The taxing enactments should be strictly construed and the right to tax and the liability thereon should be clearly established. It is a well established rule that literal construction should be adhered to in construing statutes, and the court is not justified in straining the language in order to hold the subject liable to tax.
12. The same view was taken by the Andhra Pradesh High Court in G. Venkatasubbaiah v. Tax Recovery Officer. Vaidya J., speaking for the Bench, observed thus :
'If the expression 'wound-up' and the word 'liquidation' found a section 179 are read together, the only meaning that can be attributed to the expression 'wound-up' is the meaning which is given to that expression in the Indian Companies Act. The provisions of section 179 are, therefore, limited only to those private companies against which proceedings for winding-up have been taken and have been wound up after the commencement of the 1961 Act. The expression 'wound up' cannot be liberally interpreted so as to include also companies dissolved as having become defunct without being wound up.'
13. I therefore, hold that the company in question was not wound up and the petitioner cannot be held liable under the provisions of section 179 of the Act. The action taken by the respondent for recovery of the tax due from the company was illegal and without the authority of law.
14. In the result, this petition is allowed with a direction to the respondent to for bear from recovering the tax of Rs. 1,336 from the petitioner.
15. In the circumstances, there will be no order as to costs.