Law:

Section:

Section 220 of the Income-tax Act, 1961 - Collection and recovery of tax - When tax payable and when assessee deemed in default - Amounts were due to department from company in liquidation by way of arrears of income-tax - Under wrong impression that department was entitled to priority in respect of arrears of tax no steps were taken for filing any claim before official liquidator - After list of creditors had been finally settled, department put forward his claim before official liquidator regarding amount of arrears of tax and also interest due on such arrears - Official liquidator admitted department as an ordinary creditor for actual amount of arrears of tax due but he did not include claim put forward by department for interest - Whether though department was not entitled to priority in respect of claim either for tax or interest that might be payable under section 220(2), it would be just and proper to allow department an opportunity to file its claim before official liquidator in respect of amount of interest payable by company in liquidation under section 220(2) and official liquidator should duly adjudicate claim - Held, yes FACTS Considerable amounts were due to the department from the company by way of arrears of income-tax under assessment orders passed against the company. The company was ordered to be wound up as per an order passed by the High Court. Apparently under the wrong impression that the department was entitled to priority in respect of the arrears of tax, no steps were taken for filing any claim before the liquidator in respect of the arrears of tax within the time specified by the High Court. After the list of creditors had been finally settled by the liquidator, the department, with the leave of the winding-up court, filed an affidavit of proof of the debt before the Official Liquidator. The Official Liquidator admitted that the department as an ordinary creditor only for the actual amount of arrears of tax due but he did not included within the scope of his order the claim put forward by the department for interest. Thereupon the department filed an application before the company court contending that the liquidator ought to have…

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