Law:

Section:

Section 2(35) of the Income-tax Act, 1961 - Principal Officer - Company Judge directed Official Liquidator to file income-tax return in respect of receipts of income during course of winding up proceedings of company in liquidation holding that even if winding up order was passed company continues to be 'person' within meaning of section 4, and it is duty of Court to see that all liabilities of company are properly met in accordance with law - Whether liquidator, on an order for winding-up being made, becomes "principal officer" of company within the meaning of section 2(35)(a) - Held, yes - Whether or making of an order of compensatory winding up company does not cease to have its corporate existence, and therefore liable to incidence of income-tax - Held, yes - Whether, therefore, company judge was right in requiring liquidator to file returns before ITO - Held, yes FACTS In the course of winding up of the company in liquidation, large sums of money came into the hands of the appellant liquidator which could not be immediately applied for distribution of dividends to the creditors. The result was that he had to invest the same pursuant to the relative provisions of the Companies (Court) Rules. The investments were mostly by way of bank deposits which earned interest in the course of six years from 1960-61 to 1965-66 amounting to Rs. 1,95,364.05. The auditors, in their report dated 3-3-1966, observed that the above amounts of interest received by the liquidator would attract liability for income-tax and that, therefore, appropriate steps should be taken to settle the question of such liability in order to avoid the possibility of any excess distribution of dividends. In accordance with the directions of the company judge, the liquidator made Company Application in Company Petition seeking necessary directions in regard to the question of liability to income-tax of the aforesaid amount of interest. Before the company judge it was contended that the company in liquidation was not at all liable to be assessed to income-tax in respect of the receipts by the liquidator in the course of winding-up of the company. It was further contended that under the Income-tax…

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