OFFICIAL LIQUIDATOR MYSORE SPUN SILK MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is an appeal brought on behalf of the official liquidator of the Mysore Spun Silk Mills Ltd. (in liquidation) against the order of the learned company judge (Narayana Pai J.), as he then was, made in Company Appln. No. 16 of 1967 on 23rd Jan., 1968 [(1968) 68 ITR 295 (Mys) : 38 Comp. Cas. 272 (Mys)] by which a direction was issued to the liquidator to prepare and file returns before the ITO with respect to the income of the company in liquidation derived in the course of the winding-up.

(2.) IN the course of winding-up of the company in liquidation, large sums of money came into the hands of the liquidator which could not be immediately applied for distribution of dividends to the creditors. The result was that he had to invest the same pursuant to the relative provisions of the Companies (Court) Rules. The investments were mostly by way of bank deposits which earned interest in the course of six years from 1960-61 to 1965- 66 amounting to Rs. 1,95,364.05. The auditors, M/s. B.K. Ramadhyani and Company, in their report dt. 3rd March, 1966, observed that the above amounts of interest received by the liquidator would attract liability for income-tax and that, therefore, appropriate steps should be taken to settle the question of such liability in order to avoid the possibility of any excess distribution of dividends.

(3.) IN regard to the second contention, the learned company judge held that it is the duty of the Court to see that all the liabilities of the company are properly met in accordance with the provisions of the law and that the liability to income-tax is one of the liabilities which the court is expected to provide for in the course of winding up, that the duties of the "Principal Officer" of the company after the winding-up are got performed by the Court through the liquidator in the light of the special provisions of the Companies Act and that the IT Act substitutes him for the "Principal Officer". The question whether the liquidator answers the definition of the term "Principal Officer" under s. 2(35) of the IT Act, however, was not specifically answered.