GOVERNOR GENERAL IN COUNCIL Vs. CHOTALAL SHIVDAS

JUDGEMENT

(1.) THIS is a second appeal from the decision of the Assistant Judge of Dhulia. The controversy is in regard to the prerogative claimed by the Crown, first in regard to the priority for recovery of Income-tax due from an assessee, and secondly, in regard to the procedure for enforcing that priority. The material facts are these : For the year 1933-34 there was default committed by the assessee, who is now respondent No. 2, in making payment of the income-tax in that year. The first respondent was an unsecured creditor of the assessee, and he obtained a decree in 1932 against the latter in execution of which he obtained attachment of assessees property which was liquidated and the proceeds brought into Court. Thereupon the Income-tax Officer, who had already taken steps under Section 46(2) of the Income-tax Act (XI of 1922) by forwarding a certificate under his signature to the Collector, specifying the amount of arrears due from the assessee, to enable the Collector to recover the same as if it were an arrear of land revenue, requested by letter the Subordinate Judges, in whose Court the attached amount of the assessee was lying, to recognize the priority of the claim of the Crown in respect of the Income-tax arrear. The first letter was addressed to the Subordinate Judge on the 9th of January 1935. THIS is what he wrote : "I hereby prefer a claim of Rs. 347-14-0 being the amount of tax pending against him (assessee) for the year 1933-34 and request you to be so good as to pay up the amount at your earliest convenience". That might properly be regarded as an application to the Court to distribute the amount. The Court thereupon after further correspondence and after being satisfied in regard to the priority of the claim of the Crown ordered the payment of the Crown dues before those of the decree holder. Against that order the latter preferred an appeal. The learned Assistant Judge reversed the order holding that the form adopted in making the application was irregular and illegal, and could not properly be acted upon by a Civil Court in recognition of the priority claimed. Against that order Government have preferred this second appeal.

(2.) THE prerogatives claimed by the Crown are really two : first priority, and secondly special procedure for enforcing that priority. On the first point there is considerable body of authority to hold that the Crown has priority in respect to its debts - (See Manikkam Chettiar v. Income-tax Officer, Madura South, Soniram Rameshur v. Mary Pinto, and Gayanoda Bala Dassee v. Butto Kristo Bairagee). In these cases it was held that the Crown has priority over unsecured creditors in respect to the payment of debts. It was also held that the Court can order payment of a Crown debt due by the debtor, on the application of the Crown without a formal attachment being issued, where there are funds in Court belonging to the debtor (see also Deputy Commissioner of Police v. Vedantam.) THEre is no doubt that the arrear of unpaid Income-tax due by the assessee is a debt due to the Crown, and therefore a Crown debt and as such the debt must have precedence over all other debts. Consequently in the competition between the Crown and the subject in respect of payment of their respective debts of equal degree Crowns right must prevail.

(3.) NO order on the Civil Revisional Application NO. 373 of 1937.