The requirement of obtaining leave under Section 446 (1) of the Companies Act is a condition precedent for seeking to recover tax by the ITO from a company in liquidation.

( 1 ) CAN the proviseous of S. 222 of the Income Tax Act, 1961 for recovery of tax be resented to by Income Tax Officer. without seeking leave of the Company Judge u/s 446 of the Companies Act, 1956 in the case of a Company after winding up order has been made is the questioh arising in this appeal against the Judgent of the Learned Single Judge, who has held that obtaining leave u/s 446 (1) of the Companies Act was a condition precedent for seeking to recover tax by the Income Tax Officer.

( 2 ) M/s. National Conduits Pvt. Ltd. is a company registered under the Companies Act. In respect of its employee, one S. S. Arora, the Company made deduction on account of income Tax from his salary, the total amount of which came to about Rs. 44,000. 00 for the Years 1961-62 to 1965-66. The company however, did not deposit the said amount with the Income Tax authorities. As a result on 6. 10. 1966 the Income Tax Officer. demanded from the company the payment of this amount, but to no effect. On 16. 1. 1969 an application was moved for winding up the company. An order of winding up was passed on 7. 5. 1969. On 24. 2. 1971 the I. T. O. requested the Official Liquidator for payment of Rs. 44,000. 00 due on account of deductions made from the salary of Arora. O. L. by his letter of 1 3. 1971 asked the I. T. O. to obtain leave of the High Court u/s 446 of the Companies Act, before any payment could be made by him It was apparently this which made the Income Tax Officer. on 25. 7. 72 to move an application u/s 446 of Income Tax Act, seeking leave to take proceedings under the provisions of Income Tax Act for the recovery of the aforesaid amount. It was at this stage that the issue was joined as to whether leave should be granted. The learned Judge has refused to grant leave and hence the appeal by the I. T. O.

( 3 ) SECTION 446 (1) of the Companies Act provide that when a winding up order has been made and an official Liquidator appointed no suit or other legal proceedings shall be commenced or shall be proceeded with except by leave of the Court and subject to such terms as the court may enforce. Section 530 (1) provides that in a winding up there shall be paid in priority to all other debts certain mentioned claims like wages taxes etc. Before the Learned Single Judge it was not disputed or atleast it was not established that any of the amounts claimed by the I. T. O. were covered under the preferential payments within any of the clauses of Section 530 (1) of the Act. As a matter of fact the learned Judge has specifically safeguarded the interest of the appellant by permitting it to move any time a separate application if it is able to show that any portion of a sum of Rs. 44,000. 00 is entitled to priority u/s 530 (1 ). As debt was not found to be Preferential payment, the order refusing leave is not open to objection because there is no reason why this debt should not take its place along with other debts due from the company, specially when the right of the appellant to move later on if the circumstances show that any part of debt covered by Section 530 (1 ) (a) has been protected by the learned Single Judge.

( 4 ) MR. Verma however invokes Section 537 which though by sub-section (1) provides that any attachment/execution against a company which is being wound up, - without leave of court, will be void, but by sub-section (2) excepts the applicability in proceedings for recovery of any tax payable to government. The argument is that nwithstanding section 446 of Companies Act there is an independent indefeasible power with the I. T. O. to recover the arrears of tax, u/s 537 (2) of the Act ; we cannot agree. Now Section 446 (1) is specific that after winding up order has been made no legal proceedings can be commenced or proceeded with except by leave of the court. What was however, urged was that as Section 537 (2) excepts proceedings for the recovery of any tax or dues payable to the Government it means that the proceedings for reco