SOUTHERN TEXTILES LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a limited company incorporated under the provisions of the Indian Companies Act and is having its office at Coimbatore. It placed certain orders with Messrs. Textool Company Ltd., Coimbatore, for the supply of ring frames and machinery according to certain noted specifications. THE terms agreed upon between the petitioner on the one hand and Messrs, Textool Company Ltd. on the other, inter alia, were that a sum of Rs. 35,000 should be paid as advance and the balance against the arrival of invoices; a stipulated time of delivery was prescribed and that erection should be carried out by Messrs. Textool Company Ltd. free of cost. We are not extracting or referring to the other terms of the contract as they are not relevant. It is common ground that Messrs. Textool Company Ltd. supplied certain machinery which is characterised by the petitioner as five ring frames. THE further case of the petitioner is that, thereafter, Messrs. Textool Company Ltd. did not supply further machinery under the contract nor the spare parts annexed to such a supply and did not erect the frames as contemplated under the contract. It should be remembered that the supply was in August, 1965, for which purpose Messrs. Textool Company raised an invoice against the petitioner in the sum of Rs. 2,90,913.41 under its invoice dated August 31, 1965. In the affidavit there is a categorical statement that the petitioner paid the amount to Messrs. Textools as per the invoice. But, it is followed up by the contention that, as the ring frames had been rejected, the petitioner is entitled to the said sum paid from Textool Company Ltd. Whilst this was the position, Messrs. Textools became liable to pay a large sum by way of income-tax. THE Income-tax Officer, City Circle 1(2), Coimbatore, gave notice to the petitioner under Section 226(3) of the Income-tax Act, 1961, stating that Messrs. Textools owed the sum of Rs. 3,45,000 on account of income-tax instalments, advance tax and penalty and called upon the petitioner under the aforesaid statutory provision to pay the said amount forthwith which was held by the petitioner on account of Textools. THE reply of the petitioner could be better appreciated by extracting the same:

(2.) HERE, the petitioner's case is that it is true that a large sum or at any rate the sum demanded was due to Messrs. Textools. But, they negatived their responsibility to pay the sum claimed by the revenue on the ground that though it was debited in praesenti it has to be solved in future due to certain defects in the supply and due to certain legal obligations not complied with by Messrs. Textools. Apparently, on receipt of information that such a notice was sent by the revenue to the petitioner, Messrs. Textools in their letter dated August 23, 1967, made it clear that in any event a sum of Rs 2,64,401.41 was indisputably due by the petitioner to them and requested the petitioner to pay at least that amount in partial compliance of the demand raised by the Income-tax Officer. But, the petitioner did not pay any amount and, thereafter, raised a specific plea that the rings supplied were not in accordance with the specifications, that there were certain defects therein and that in consequence of the non-erection of the machinery as undertaken by Messrs. Textools, they have practically rejected the goods and, hence, they are not legally obliged to respect the amount said to be payable by them to Textools and in that behalf, disclaimed any responsibility to pay over such alleged dues to the revenue as demanded by the Income-tax Officer. But, as the Income-tax Officer was pursuing the statutory remedies available to him and even sent the tax recovery certificate to the second respondent for recovery of the said amount claimed by him earlier under Section 226 of the Income-tax Act, the petitioner has come up to this court for the issue of a writ of mandamus directing both the respondents to forbear from enforcing the recovery of the amount claimed pursuant to the provisions of the Income-tax Act, 1961.