Law: Income Tax Act, 1961

Section: 226,226(4)

Income-tax-----Recovery of tax----Priority of debts of Revenue---Effect of S.226(4)--¬Money belonging to assessee lying in custody of Court---Application by creditors of assessee for rateable distribution-- -Application under S.226(4) during pendency of such application was rnaintainable---Money lying in executing Court continues to belong to -debtor till it is disbursed among creditors---Payment of money to creditor after application under S.226(4) would not render such application infructuous---Indian Income Tax Act, 1961, S.226(4)---Indian Code of Civil Procedure, 1908, S.73. Under section 226(4) of the Income Tax Act, 1961, the Assessing Officer or the Tax Recovery Officer can move the Court having custody of money belonging to the assessee for payment to him of such money for discharging the tax liability of the assessee. What is necessary is that on the date when the application is made, the Court should have custody of money belonging to the assessee. Under section 73 of the Code of Civil Procedure, 1908, the money lying in the executing Court continues to belong to the -debtor till it is disbursed among the decree-holders or other creditors of the -debtor. Payment of money by the Court after the filing of the application under section 226(4), would not render such application infructuous. Various persons including the appellant held decrees against JM & Company. In proceedings for execution of those decrees, the decree-holders sought to attach various sums of money which were lying to the credit of the said -debtors in the Court of the Civil Judge, Agra, in Suit No.76 of 1979. The decree-holders moved an application for rateable distribution under section 73 of the Code of Civil Procedure. On May 28, 1973, the Civil Judge, Agra, had sent cheques to the executing Court, viz. the Civil and Sessions Judge, Agra, for payment to the decree-holders, including the appellant, after taking security from them. On August 31, 1973, the Union of India moved an application under section 226(4) of the Income Tax Act, 1961. The application was contested by the decree-holders, including the appellant, and the Civil and Sessions Judge, Agra, dismissed the said…

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