The main legal point established in the judgment is that the liquidator, as an officer employed under the Companies Act for the discharge of the company's liabilities, can be rightly termed as the agent of the company and therefore, falls within the definition of 'principal officer' under section 2(35)(a) of the Income Tax Act, 1961.

Govinda Bhat, J.—This is an appeal brought on behalf of the official liquidator of the Mysore Spun Silk Mills Ltd. (in liquidation) against the order of the learned company judge (Narayana Pai J.), as he then was, made in Company Application No. 16 of 1967 on 23-1-1968 by which a direction was issued to the liquidator to prepare and file returns before the Income Tax Officer with respect to the income of the company in liquidation derived in the course of the winding-up.

2. In the course of winding-up of the company in liquidation, large sums of money came into the hands of the 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, Messrs. B. K. Ramadhyani and Company, in their report dated March 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.

3. In accordance with the directions of the learned company judge, the liquidator made Company Application No. 16 of 1967 in Company Petition No. 435 of 1968 seeking necessary directions in regard to the question of liability to Income Tax of the aforesaid amount of interest. Before the learned company judge it was contended that the company in liquidation is 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 Act, 1961, it is only the "principal officer" of the company that is competent to make a return and it is only to the principle officer of the company that notices can be issued in proceedings under the Act and the liquidator not being the principal officer of the company he cannot be directed to submit the returns.

4. On the first ground, the learned company judge held that, even after a winding-up order is passed, the company continues to be a person within the meaning of section 4 of the Income Tax Act, and, therefore, any receipt of income in the course of the winding-up which would attract liability to Income Tax under its appropriate provisions would be liable to Income Tax. At this stage, it is necessary to state that the said view of the learned company judge has rightly not been challenged in this appeal.

5. In regard to the second contention, the learned company judge held that it is the duty of the court to see that all the liabilities of the company are properly met in accordance with the provisions of the law and that the liability to Income Tax is one of the liabilities which the court is expected to provide for in the course of winding up, that the duties of the "principal officer" of the company after the winding up are got performed by the court through the liquidator in the light of the special provisions of the Companies Act and that the Income Tax Act substitutes him for the "principal officer". The question whether the liquidator answers the definition of the term "principle officer" under section 2(35) of the Income Tax Act, however, was not specifically answered.

6. Sri K. Srinivasan, the learned counsel for the appellant, contended that the liquidator of a company in liquidation under the orders of the court does not come within the definition of "principle officer" under section 2(35) of the Income Tax Act, 1961. Section 2(35) of the Act reads :

"2. Definitions. - In this Act, unless the context otherwise requires, -

(35) "Principal officer", used with reference to a local authority or a company or any other public body or any association of persons or any bod