INCOME TAX OFFICER BANGALORE I AND Vs. MYSORE SPUN SILK MILLS LTDIN LIQUIDATION

JUDGEMENT

(1.) The applicant Income-tax Officer, Special Investigation Circle A, Bangalore, had made a claim for preferential payment to him of a sum of Rs. 14,503.80 nP. from the assets of the company in liquidation. The claim is wholly rejected by the liquidator by his order dated 18th January, 1962. In this application, the applicant appeals against the order of the liquidator rejecting his claim.

(2.) The facts and circumstances, on the strength of which the claim had been made, are briefly the following : The company had entered into a contract with a firm of builders called "South India Builders" for construction of certain buildings. The said firm of builders had defaulted in payment of income-tax due by them, for recovery of which the Income-tax Officer, Bellary, who was the appropriate assessing authority in respect of the said firm, issued to the company on 11th February, 1953, a notice under the provisions of section 46(5A) of the Indian Income-tax Act, 1922, requiring the company to pay to the officer the money due by it to the defaulting assessee. In reply to the notice, the company in its letter dated 20th February, 1953, after acknowledging receipt of the said notice, stated as follows : "The above firm has done some contract work for us in the years 1947-48-49 and have obtained payment in respect of the works executed on interim bills by way of cash and material advances. Only a sum of Rs. 14,503-12-9 is due to them according to our books. But they have not signed and returned to us the final bills prepared by our engineer. This amount becomes payable to them only on their signing, accepting and delivering the bills to us. Till such time we are keeping this amount in suspense under restraint. We have asked the party to expedite sending of the bill."

(3.) It also appears from the same reply that a similar notice had been received by the company from the II-Additional Income-tax Officer, Urban Circle, Bangalore. The company, however, did not make any payment to the income-tax department. In December, 1956, the company wrote to the Income-tax Officer, Special Circle at Bangalore (to whom the learned counsel for the applicant says the matter of collecting arrears of tax due by the firm of builders had been entrusted), stating that the question whether the company was legally liable to pay any amount to the South India Builders had been referred for legal opinion. After receipt of such legal opinion, the company wrote once again to the same officer on 28th December, 1956, as follows :