Law:

Section:

Section 179 of the Income-tax Act, 1961 - Company in liquidation - Liability of directors - Assessment years 1953-54 to 1957-58 - Whether section 179 is applicable only to cases where proceedings for winding up of company are taken under Indian Companies Act and company is wound up under said Act after commencement of Income-tax Act, 1961 - Held, yes - Whether expression 'wound up' as occuring in section 179 cannot be liberally interpreted so as to include also companies dissolved as having become defunct without being wound up - Held, yes Words and phrases: Word 'liquidation' and expression 'wound up' as occuring in section 179 of the Income-tax Act, 1961. FACTS The petitioners were directors of a private limited company. Certain sum was due by the company towards income-tax for the relevant assessment years. The company ceased to carry on business after 1955 and on 26-06-1955, the Registrar of Companies, issued a notification under section 560(5) of the Companies Act, 1956, striking off the company from the register. Thereafter the ITO issued notices to the petitioners stating that they were personally liable to pay the tax due by the company under section 179. The petitioners in instant writ petition sought for quashing of the said notices contending that section 179 was not applicable as the company never went into liquidation and was not wound up after the commencement of the Act. HELD The basic condition that is necessary for the application of the section 179 is that a private company should have been wound up after the commencement of the 1961 Act. It is only when this condition is fulfilled that the other provisions of section 179 are attracted. Section 179 has been introduced to create a liability which did not exist under the Indian Income-tax Act, 1922 and, further, that section creates a liability which is contrary to the provisions of the Companies Act. It is very clear from the section itself as it starts with saying 'notwithstanding anything contained in the Companies Act, 1956. 'As the section creates a new liability and is in a taxing statute, it has to be strictly interpreted unless a liberal interpretation has to be given by way of necessary…

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