STARIT INDIA LTD Vs. STATE

JUDGEMENT

(1.) The short but interesting question that arises in this matter is whether Capital Gains Tax payable under Section 45 of the Income Tax Act has precedence over the claims of other secured creditors covered by Section 530 read with Section 529(A) of the Companies Act.

(2.) The Company is under liquidation. The workers of the Company in liquidation had filed claims for payment of their dues as secured creditors. By order dated 31st August 1996 the Court allowed the application and also directed payment of interest. The said order has not been challenged. The present dispute is regarding payment of interest pursuant to order of this Court dated 31st August, 1996. On behalf of the Department of Income Tax, Government of India, the same has been opposed on the ground that the Department has a preferential rights in respect of the properties sold by the Liquidator and that the Capital Gains Tax has preference over dues of other secured creditors. The Department has claimed two amounts one in an amount of Rs.10 lakhs and the other of about Rs.90 lakhs as capital gains tax pursuant to the sale of a property. The amount of Rs.10 lakhs is not in issue here. The Official Liquidator as per para 7 has averred that the present fund position of the Company is around Rs.43,68,230.25 Ps. If the demand of the Department is to be satisfied then no amount would be available to be paid to other secured creditors including the workers.

(3.) For that purpose it would be essential to consider Section 178 of the Income Tax Act, 1961 . Section 178 reads as under :