Law:

Section:

Section 222 of the Income-tax Act, 1961 [Corresponding to section 46(2) of the Indian Income-tax Act, 1922] - Collection and recovery of tax - Certificate proceedings - Assessment year 1955-56 - Whether order of appointment of receiver in an action of simple mortgagee or equitable mortgage to recover mortgage amount with direction to him to bring in rents and profits from hypotheca to credit of suit without order of appropriation or allocation in favour mortgagee does not amount to charging order in favour of mortgagee - Held, yes - Whether in dependently of order appointing receiver a simple mortgagee or an equitable mortgagee or a charge-holder in respect of immovable property has no security over rents and profits accruing from property - Held, yes FACTS A suit on mortgagee was filed and a preliminary decree was passed. By order of the Court, dated 8-2-1955, a receiver was appointed. The debtor in that suit was assessed to income-tax for the year 1955-56. On 13-2-1956, the First Additional ITO issued a certificate under section 46(2) of the 1922 Act for the amount of tax due from the assessee and forwarded it to the Collector. The Collector applied to the Sub-Court for payment of the sum out of the receiver's collections deposited to the credit of the suit. This application was opposed by the assignee-decree-holder on the ground that the income from the hypotheca collected by the receiver formed accretions to the hypotheca, and that such income was liable to be proceeded against in case the corpus was insufficient to satisfy the mortgage decree in full. The collector contended that the amount due to the Government by way of income-tax levied on the debtor was a 'Crown' debt, the payment of which can be enforced with a right of priority over other unsecured debts which may be owing by the assessee to others. The Subordinate Judge held that, though mortgagee decree-holder can proceed against the income realised by the receiver only after exhausting his remedies against the hypotheca, the Government would have no right to proceed against such income at the present moment as the mortgage debt still remains undischarged. The Subordinate Judge further held that…

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