MYSORE SPUN SILK MILLS LTD Vs. IN RE

JUDGEMENT

(1.) AS almost all the details of work in connection with the winding-up of the affairs of the company had been concluded and there appeared to be available with the liquidator more than a lakh of rupees and requests were made on behalf of the petitioning-creditor and other that steps may be taken to declare a final dividend, I directed the liquidator to file a report giving particulars so that that I may give further directions for the above purpose.

(2.) THE liquidator filed a report stating that though there was with him a sum of Rs. 1,47,483 in the account of the winding-up, it may not be possible to declare a dividend for the reason that large amounts would be required to pay the fees due to Central Government and also that the auditors had suggested that there was also a tax liability in respect of income arising out of the investments made in the course of winding up. As the liquidator appeared to entertain the opinion that it was a matter for doubt whether the company in liquidation could be held to be liable to tax in the light of the recent amendments of the Income-tax Act and the Companies Act, I asked him to take out a formal application for directions. THE above Application No. 16 of 1967 is such an application.

(3.) IN the course of the audit of accounts of the company for the half year ended 30th September, 1965, the auditors, M/s. B. K. Ramadhyani and Company, in their report dated 3rd March, 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 excess distribution of dividends. IN my order dated 18th March, 1966, while accepting the report of the auditors, I had also made a direction that the liquidator should take out a separate application for necessary directions in regard to the question of liability to income-tax of the above amounts of interest.