COMPANIES ACT, 1956

8. LIABILITY TO TAX
S*

Section 446(1) -Company in liquidation—Recovery of debt —Leave

of court—Liability to assessment to Income-tax—Preference to In -
come-tax debt. [Income tax Act, 1961, Section 178).
A company in liquidation is not exempt from income-tax, but by virtue
of Section 178 of the Income-tax Act it is liable to assessment. The Income-
tax Officer may treat the liquidator of a company in liquidation as a principal
officer for the purposes of assessment. The leave of the court, as contemplated
under Section 446(1) of the Companies Act, is not necessary in respect of any
and every proceeding against a company in liquidation, but it is generally
required if the proceeding is directed against the estate or effects of the
company. It follows that leave of court will not be necessary in respect of
any assessment proceeding which docs not affect the properties of the com-
pany. Once the assessment is completed, a debt is created, in favor of the
revenue department and the department has to prove it in liquidation and the
claim of the department will be paid in the same manner as the debt of other
creditors. The department is empowered to enforce its right of recovery of
the debt in accordance with the provisions of the Income-tax Act, but this
right to enforce recovery against the assets of the company will attract the
provisions of Section 446(1) of the Companies Act There is nothing in the
Income-tax Act which may entitle the department to realize its debt in pre-
ference to other creditors.
Official Liquidator, High Court, Calcutta v. Commissioner of Income-lax,
(1971) 41 Comp. Gas. 477 (Cal,).
9. PRACTICE * PROCEDURE
Section 446—Winding-up of company—Suit against company if
and when to be proceeded.
Under Section 446 of the Act when a winding-up order has been made
or the official liquidator has been appointed ns provisional liquidator, no suit
or other legal proceeding shall be commenced, except by leave of the court
and subject to such terms as the court may impose. Similarly, if at the time
when the winding-up order has been made or the official liquidator has been
appointed as provisional liquidator any suit or legal proceeding is pending, it
can be proceeded with, against the company, only with the leave of the court
and subject to such terms as the court may impose.
Star Engineering Works Ltd. v. Official Liquidator {of the, Krishna Kumar
Mills Co. Ltd. (In Liquidation) and others, (1977) 47 Comp. Gas. 30 (Guj.).
Section 446—Companies (Court) Rules 1959—Rule 118 - Civil Proce -
dure Code, 1908—Section 80-Company in Liquidation—Suit filed by
official liquidator for recovery of secured debt—whether appointment
of receiver can be validly made? Necessity of notice u/s 80 G P G.
Held (a) This application is an application for appointment of receiver
in respect of properties alleged to be charged and hypothecated in favor of
the plaintiff-bank by Tatanagar Foundry Co. Ltd. prior to its liquidation. The
first ground of opposition this application was that there has bun non-com-
pliance of Section 453 of the Companies Act, 1956. The said section states
the-'.t the receiver shall not be appointed on any assets in the hands of the liqui-
dator except by or with the leave of the court, lam unable to sustain this