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Manickam Chettiar Vs. Income-tax Officer, MadurA. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai
Decided On
Reported inAIR1938Mad360; [1938]6ITR180(Mad)
AppellantManickam Chettiar
Respondentincome-tax Officer, MadurA.
Cases ReferredMadras v. Vedantam
Excerpt:
.....withdrawal of the money in a case like this ? according to the argument it would mean that the crown would have to file a suit against the debtor and the opposing creditor and then obtain an interim injunction preventing the money from being withdrawn from court pending the decision of the suit. as a matter of expediency it is obvious that the course adopted here is the better......if the chief justice so directs.this revision petition arises out of an application made by the income-tax officer of madura south to the district munsif of madura town, purporting to be under sec. 151 c.p.c., and praying that out of some moneys in the custody of that court in the course of the execution of a decree obtained by the present petitioner against the assessee, the arrears of income-tax due by the assessee, might be paid in the first instance. two questions were raised before the lower court on behalf of the present petitioner, viz., (i) whether there the governments claim was entitled to priority and (ii) whether, as a matter of procedure, the petition by the income-tax officer to the civil court was sustainable. on both those points the lower court held against the.....
Judgment:
ORDER

OF REFERENCE.

VARADACHARIAR, J. - Mr. Balasubramania Aiyar raised two questions before me, in support of this revision petition. On one of them I feel little doubt, but the other point is one of some importance and, notwithstanding the reliance placed on behalf of the Government on the decisions in Deputy Commissioner of Police v. Vedantam and Soneram Rameshur v. Mary Pinto. I think that it should be considered by a Division Bench or even by a Full Bench if the Chief Justice so directs.

This revision petition arises out of an application made by the Income-tax Officer of Madura South to the District Munsif of Madura Town, purporting to be under Sec. 151 C.P.C., and praying that out of some moneys in the custody of that court in the course of the execution of a decree obtained by the present petitioner against the assessee, the arrears of income-tax due by the assessee, might be paid in the first instance. Two questions were raised before the lower court on behalf of the present petitioner, viz., (i) whether there the Governments claim was entitled to priority and (ii) whether, as a matter of procedure, the petition by the Income-tax Officer to the civil court was sustainable. On both those points the lower court held against the present petitioner and directed payment to the Government in the first instance. Hence this revision petition by the decree-holder.

So far as the priority of Governments claim is concerned, I see no reason to differ from the view taken by the lower court, Mr. Balasubramania Aiyar relied on an expression of doubt in Ramachandra v. Pitchaikanni as to the applicability in this country of the English doctrine relating to the priority of the Crown debts; but I think the weight of authority in favour of the recognition of that priority even in this country is so strong that this expression of doubt cannot help the petitioner to any material degree (Cf. 59 Mad. 428 and Varadachari v. Secretary of State, Gayanoda Bala Dassee v. Butto Kristo Bairagee, Soneram Rameshur v. Mary Pinto and the provisions in the Insolvency Acts relating to the priority of Crown debts).

It is on the question of procedure that I have felt some difficulty. Some of the cases above referred to arose out of applications on behalf of the Government to recover court-fees payable to Government in pauper suits. There is no difficulty in supporting the maintainability of the petition by Government in that class of cases, because the Civil Procedure Code treats the Government as a decree-holder to the extent of the court-fee payable and the ordinary procedure under the Code is available for the enforcement of that claim. In Soneram Rameshur v. Mary Pinto the petition related to the recovery of income-tax, and in that sense the case is directly in point; but though the learned judge gave a ruling in favour of the maintainability of the petition, he also states that the application was not opposed on behalf of the respondents and that they consented to the payment. I am therefore unable to treated that decision as concluding the point. In Deputy Commissioner of Police v. Vedantam, Cornish, J., was dealing with a claim for arrears of motor tax, and relying upon In re Henley & Co., and on the decision in Gayanoda Bala Dassee v. Butto Kristo Bairagee the learned judge held that an application like the present must be treated as maintainable. The 33 Cal. case is not strictly analogous because it related to a claim for court-fee payable to Government in respect of which, as already observed, Government is in the position of a decree-holder. The proposition that the declaration of a first charge on the subject-matter of the suit does not preclude the Government from enforcing its claim as a decree-holder in other ways does not throw much light upon the question now raised before me. In re Henley & Co., no doubt, recognised the right of the Crown to proceed otherwise than in the manner pointed out by the Income-tax Act, but in that case, as the application was made in the course of liquidation proceedings, an application would be the proper form. The Indian Income-tax Act of 1922 makes detailed provisions in sec. 46 for the recovery of income-tax. Certain powers are given to the Collector and certain powers are given to the Income-tax Officer. I make no further reference to the provision relating to the Collectors power because no application has been made in the present case by the Collector and the Act does not expect him to make an application but to exercise certain powers of his own. The Income-tax officer is authorised under certain conditions to adopt the procedure available for the collection of arrears of municipal tax or local rate. Provision is also made in sub-clause (5) for a requisition to persons paying salaries to assessees. It is a matter requiring consideration whether in view of these detailed provisions having been made by the statute itself for the recovery of assessment, it is permissible to recognise in addition an application to the ordinary civil Court which must prima facie be regarded as dealing only with the rights of litigants in the ordinary civil court. It may be that arrears of income-tax can be made the subject-matter of a regular suit as a Crown debt; but whether an application under Section 151, C.P.C. or under any general principle of law was at all contemplated by the Income-tax Act or by the provisions of the C.P.C. is a matter about which I entertain grave doubts, notwithstanding the respectful attention that I have given to the cases to which I have already referred. It is this point that I should like to be heard and decided authoritatively by a Bench subject to the order of the Chief Justice. The decision in C.M.P. 2083 of 1933 affords me no guidance because there was in that case distraint order issued by the Tahsildar under the provisions of the Revenue Recovery Act.'

The case was heard by a Full Bench.

LEACH, C.J. - The petitioner obtained a money decree against one Govinda Rao and in execution thereof attached certain moveable properties belonging to the judgment debtor and brought them to sale. Govinda Rao under an order of assessment dated the 28th August 1934 was required to pay a sum of Rs. 301-13-0 by way of income-tax. He did not comply with the notice of demand for payment and on the 12th November 1934 a penalty of Rs. 10 was imposed by the Income-tax Officer because of the default, thus increasing the total amount due by the assessee to Rs. 311-13.0. Before the sale the Income-tax Officer filed an application in court asking for an order directing the payment out to him from the sale proceeds when the sale took place of the amount due to government by Govinda Rao. The sale in execution was in due to government by Govinda Rao. The sale in execution was in due course carried out but only realised Rs. 227-9-0. After reserving the amount required for the costs of execution the District. Munsif ordered the balance to be paid out to the Income-tax Officer. The question which we are called upon to decided is whether the court had power to order the payment out of moneys due to government on mere application.

I had occasion to consider this question in the case of Soneram Rameshur v. Mary Pinto when sitting as a judge of the Rangoon High Court, and, following the decision of Sale, J., in Gayanoda Bala Dassee v. Butto Kristo Bairagee, held that inasmuch as the Crown has priority over unsecured creditors in the payment of debts the court can, on application and without a formal attachment being issued, order the payment of a Crown debt due by the debtor, where there are funds in court belonging to the debtor. The District Munsif referred to this decision in his order. The order which I passed in that case was passed by consent, and the only arguments were those addressed to the court on behalf of the Crown, but the question has been fully argued before us to-day and I see no reason for changing the opinion there expressed.

It has been suggested that inasmuch as Sec. 46 of the Indian Income-tax Act provides modes for the recovery of arrears of income-tax the Crown is not entitled to adopt any different method. Sub-section (2) states that the Income-tax Officer may forward to the Collector a certificate under his signature specifying the amount of arrears due from an assessee, and the Collector, on receipt of such certificate, shall proceed to recover from the assessee the amount specified as if it were an arrear of land revenue. Without prejudice to any powers of the Collector in this behalf he shall for the purpose of recovering the amount have in respect of the attachment and sale of debts due to the assessee the powers which under the Code, a civil court has in respect of attachment and sale of debts due to a judgment debtor for the purpose of the recovery of an amount due under a decree. By Sub-section (3) it is provided that in any area in respect of which the Commissioner has directed that any arrears may be recovered by any process enforceable for the recovery of an arrear of any municipal tax or local rate imposed under any enactment for the time being in force in any part of the province, the Income-tax Officer may proceed to recover the amount due by such process. Under Sub-section (5) if any assessee is in receipt of income chargeable under the head 'salaries' the Income-tax Officer may require the employer to deduct from his salary what is due by way of income-tax. This section, however, does not profess to be exhaustive and it cannot without express words to that effect take away from the Crown the right of enforcing payment by any other method open to it. Therefore I do not regard Sec. 46 as imposing a bar to an application of the nature of the one we are now concerned with.

The learned advocate for the petitioner then contends that as a private person cannot enforce payment without first obtaining a decree the Crown is in the same position. The argument is that a private person is governed by the provisions of the Civil Procedure Code and as there is nothing in the Code which places the Crown in a different position the procedure there contemplated must be followed. I am unable to agree. This argument ignores the special position of the Crown, the special circumstances and the courts inherent powers. It cannot be denied that the Crown had the right of priority in payment of debts due to it. It is a right which has always existed and has been repeatedly recognised in Indian. If the Crown is entitled as it is, to prior payment over all unsecured creditors the position of secured creditors does not arise. I see no reason why the Crown should not be allowed to apply to the Court for an order directing its debt to be paid out of money in court belonging to the debtor, without having to file a suit. Of course it must be a debt which is not disputed or is indisputable. In this case the debt represents money due to the Crown under the Income-tax Act and the demand of the Income-tax Officer is not open to question.

What would be the effect if the Crown were not able to apply to the Court for the withdrawal of the money in a case like this According to the argument it would mean that the Crown would have to file a suit against the debtor and the opposing creditor and then obtain an interim injunction preventing the money from being withdrawn from court pending the decision of the suit. When the suit comes on for hearing the court would be bound to decree it. Therefore there would be not only a great waste of the time of the parties and of the court, but the opposing creditor would run the danger of being mulcted in costs.

The court must pay money in is hands out to the person entitled to it. If the court were asked to pay out money to A with the certain knowledge that the money belonged to B it would naturally decline to do so and would make sure that B got it. Here, the Crown is entitled to the money in Court - there is no question about this - and asks the court to pay it out. The right to payment being indisputable, justice requires that it should be paid out to the Crown and formal application for payment has been made. It seems to me that both right and convenience demand that the court should exercise its inherent power.

At one stage the learned advocate for the petitioner suggested that the attachment having taken place the petitioner was in the position of a secured creditor. This argument is not open to him in view of the decision of a Full Bench of this court in Krishnaswami Mudaliar v. Official Assignee of Madras. He did suggest that this decision has been overruled by the Judicial Committee in Anantapadmanabhaswami v. Official Receiver of Secunderabad, but is clear from a perusal of the report that their Lordships there refused to go into the question and reserved their decision for a future occasion. Consequently we have got to accept the decision in Krishnaswami Mudaliar v. Official Assignee of Madras as stating the law correctly; and the petitioner is not in the position of a secured creditor.

The learned advocate for the petitioner has also argued that unless there is some statute which expressly authorises a petition of this nature the petition cannot be maintained. I have in effect already dealt with this question and it follows from what I have said that I do not consider that a special Act of the legislature is required to enable the Crown to apply to the court for payment out of money to which it has an undoubted right.

In the case of the Deputy Commissioner of Police, Madras v. Vedantam, Cornish, J., took the same view. There money was due to the Crown as arrears of tax under the Motor Vehicles Taxation Act. The learned judge also relied on the judgment of Sale, J., in Gayanoda Bala Dassee v. Butto Kristo Bairagee.

For these reasons I am of the opinion that the District Munsif came to the correct conclusion and his order should not be disturbed. The petition will be dismissed with costs.

VARADACHARIAR, J. - My doubts have been indicated in the order of reference. I am not able to say that they have been wholly dispelled. They are, however, not serious enough to warrant my dissenting from the conclusion which my Lord and my learned brother have reached on what is after all a question of procedure. Even when making the reference I felt no doubt as to the right of the Crown to priority. I may add that the balance of convenience certainly seems to be in favour of the view indicated in the judgment just delivered. I, therefore, agree with the order dismissing the petition with costs.

MOCKETT, J. - I agree with my Lord the Chief Justice. It must be remembered that the court holds the money for the purpose of paying it to the person entitled to it, and in this Presidency so long as the decision in Krishnaswamy Mudaliar v. Official Assignee of Madras is law, as it undoubtedly still is, there is no difficulty with regard to third parties claiming prior rights by way of attachment. The position being so, this case does not seem to present any difficulty. As a matter of expediency it is obvious that the course adopted here is the better. The alternative seems to be, this, as has been pointed out by my Lord the Chief Justice, a suit is filed with regard to a matter which the defendant cannot consent and the only result is that there is delay and unnecessary expenditure for the parties. What happens under the present procedure Here is this money lying in court for the purpose of being paid out to the person who is entitled to receive it. The Crown goes to the court and says, 'Here is a debt which is due to me about which there can be no dispute.' I consider that under those circumstances the court can rightly invoke its power under Sec. 151, C.P.C., in making the payment to the person entitled to it. Cornish, J., in the case to which my Lord has referred, Deputy Commissioner of Police, Madras v. Vedantam, draws attention to a decision from which I have derived assistance, In re Henley & Co. In that case a Bench consisting of James, Brett and Cotton, L. JJ., emphasised that the fact that a remedy is given by a statute for the recovery of a debt due to the Crown in no way takes away the right of the Crown to invoke other methods if it thinks fit.

I agree that the decision of the court below is right and that this petition should be dismissed with costs.

Petition dismissed.


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