Law:

Section:

Section 31 of the Wealth-tax Act, 1957, read with sections 529A and 530 of the Companies Act, 1956 - Collection and recovery of tax - When tax payable and when assessee deemed in default - Official Liquidator filed application to direct income-tax department to waive penalty imposed by it on wealth tax under section 31(2) - Whether since Official Liquidator had adjudicated claims of secured creditors as contemplated under section 529A of 1956 Act, which caused delay in paying wealth tax to authorities, delay in payment of tax on which interest was levied was not due to fault of company - Held, yes - Whether, therefore, interest levied by authorities was to be waived - Held, yes FACTS The Official Liquidator filed the instant application to direct the income-tax department to waive the penalty imposed by it on wealth-tax under section 31(2) and to dispose of the petition made before the income-tax department by the Official Liquidator. HELD The provisions relating to notice of demand and collection and recovery of tax in both the Income-tax Act as well as the Wealth-tax Act are identical. Under section 529A of the 1956 Act, the Official Liquidator has to first adjudicate the claims of workmen and the dues to the secured creditors and thereafter, discharge all other debts, namely, revenues, taxes, cesses and rates due from the company to the Central or State Government or local authority as contemplated under section 530 of the 1956 Act. Following the same, in the instant case, the Official Liquidator had adjudicated the claims of the secured creditors, which caused delay in paying the wealth-tax to the authorities. The delay in payment of tax, on which interest was levied, was not due to the fault of the company. Moreover, no details were furnished by the tax authorities to show any demand was made. The High Court is vested with the powers to waive the claims like interest and penal interest in a fit and proper case. The instant case was a fit and proper case to waive the interest demanded by the authorities. Hence, the claim of the authorities in respect of interest was unsustainable in law. However, it was made clear that the Official Liquidator had to pay the…

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