Law:

Section:

Section 179 of the Income-tax Act, 1961 - Company in liquidation - Liabilities of directors - Assessment years 1952-53 and 1953-54 - Whether section179 does not relate to a private company whose name has been struck off register under section 560 of the Companies Act - Held, yes - Whether under section179 directors of private limited company can be made personally liable to pay tax of company only when such company is wound up after commencement of Act and, assessed tax cannot be recovered from company - Held, yes - Whether, therefore, where proceedings against a company are still pending, section 179 cannot be invoked - Held, yes FACTS The petitioners were directors of the company. The company was dissolved on 3-4-1967 under section 560(1)(2)(3) and (5) of the Companies Act. The company was liable to pay assessed tax relating to the assessment years 1952-53 and 1953-54, during which period the petitioners were directors, though subsequently, they ceased to be director. Recovery notices were issued in July 1967 against the petitioners and the tax recovery proceedings started against the company. No notice under section 156 was issued on the petitioners. Therefore, they were not defaulters within the meaning of section 222. The petitioners challenged the notice issued to them by filing writ petition. HELD A company may be wound up either voluntarily or by the court. Sub-section (4) of section 560 of the Companies Act relates to such winding up of a company, whereas sub-sections (1), (3) and (5) relate to a company which is not carrying on any business. The legal entity of a company is not extinguished by its liquidation or by an order of its winding up. The dissolution, under section 560, puts an end to the life of a company. The legislature knew this distinction and yet did not make any provision under the Indian Income-tax Act for recovering the assessed taxes from the directors of a dissolved private limited company. Section 179 of the Indian Income-tax Act, does not relate to a private limited company whose name has been struck off the register under section 560 of the Companies Act, because on striking out the name of the company its legal entity is…

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