Judgement

SIKRI, J.: This appeal pursuant to a certificate of fitness granted by the High Court of Maharashtra at Bombay under Art. 133(1)(e) of the Constitution is directed against the judgment of the said High Court in a petition under Art. 226 of the Constitutions filed by the respondent.

2. The Indian Fisheries (P) Ltd. hereinafter called the respondent was a private limited company and was directed to be wound up by an order of the Bombay High Court dated October 11, 1950, and a Court Liquidator was appointed as the Officer Liquidator thereof with all powers under S. 179 of the Indian Companies Act, 1913 (VII of 1913) to be exercised by him under S. 180 without sanction or intervention of the Court save and except in case of sales of immovable property belonging to the respondent. For the assessment year 1948-49, the respondent was assessed on December 8, 1950, the tax being assessed at Rs. 8,737/15/- On or about March 15, 1951, the Income Tax Officer lodged a claim in respect of this tax with the Official Liquidator. That claim was adjudged and allowed as an ordinary claim and certified as such on April 2, 1952. In August, 1954, the Official Liquidator declared a dividend of 9 1/2 annas in a rupee and paid to the Income Tax Department a sum of Rs. 5,188/3/- against the claim made by the Income Tax Officer as an ordinary creditor. Thus a balance of Rs. 3,549/12/- still remained payable to the Income Tax Department from the assets of the respondent.

3. For the year 1955-56, the Department made a demand from the respondent on June 22, 1954, for a sum of Rs.2,565/6/- as advance tax. This was paid by the Official Liquidator. On a regular assessment being made for the said year, only Rs. 1,126/12/- was assessed as payable by the respondent. After adjusting this sum against the advance payment of Rs. 2,565/6/-, Rs. 1,460/1/- because refundable to the respondent, inclusive of interest. Instead of refunding the said balance to the respondent, the Income Tax Officer set off the said amount against the balance of Rs. 3,549/12/- which was still outstanding in respect of the Income tax demand for the year 1948-49. The respondent filed a revision petition to the Commissioner of Income-tax, but the said petition was rejected by the Commissioner on September 21, 1959, holding that the action of the Income Tax Officer was perfectly justified under the provision of S. 49E of the Income Tax Act.

4. On November 25, 1959, the respondent filed a petition under Art. 226 of the Constitution and prayed for a writ direction or order for setting aside the orders of the Income Tax Officer and the Income Tax Commissioner. He further prayed for any further writ, direction or order restraining the Department from setting off the refund against the tax dues and directing them to hand over the balance to the Official Liquidator.

5. The High Court held that the demand of Rs. 8,787/12/- in respect of the assessment year 1948-49, being adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the Official Liquidator to the Department. The High Court observed that "this claim thereafter was governed by the provisions of the Company law and could be paid to the creditor only in accordance with the provisions of the Company law. No other remedy nor any other method of obtaining satisfaction of this claim was available to the creditor there after. It was no longer the amount of tax remaining payable by a person to whom the refund was due within the meaning of S. 49E of the Income Tax Act. In our opinion, therefore, the provision of S. 49E was not available to the Department for setting off the amount of the excess towards the balance of its claim of Rs. 8,787/15/- which the department had proved in the insolvency of the company and was being dealt with in the Insolvency". The High Court accordingly set aside the orders passed by the Department in so far as they set off the amount of refund towards the tax remaining payable