BANK OF BARODA V. COMMISSIONER OF INCOME TAX and O

CWJC/7703/2011

AI Insights

The case involves the Bank of Baroda, which filed a petition under Article 226 of the Constitution against the Commissioner of Income Tax and other officials, challenging a demand notice for tax recovery on interest payments made to the official liquidator. The interest was on deposits made by the official liquidator in the context of winding up proceedings of Rohtas Industries Ltd. The bank argued that the funds were not taxable under Article 289 of the Constitution and cited a Supreme Court judgment supporting their claim. The court's decision to stay the demand was influenced by the pending appeal at the Income Tax Appellate Tribunal and the substantial legal questions it raised.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 751611 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 06-05-2011
• Assessment Year: misc
• Other Referred Cases: J.K.(Bombay)(P)Ltd. versus New Kaiser-I-Hind SPG. Co. Ltd. & Ors. Etc. [AIR 1970 SC 1041]
• Laws Referred To: Article 226 of the Constitution, Income Tax Act, 1961, Companies Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD
• Assessee Lawyers: D V PATHY; ABHI SARKAR
• Keywords: Official liquidator; Stay of Demand Notice; Substantial questions of law; Tax deduction at source; Winding up proceeding
• Section: 201; 154; 199; 448; 446; 433

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT PATNA CIVIL WRIT JURISDICTION CASE No.7703 of 2011 ====================================================== Bank Of Baroda, having its office at Fraser Road, P.O.-G.P.O., P.S. Kotwali, Patna through its Chief Manager, Smt. Vinita Sinha, wife of Shri Bhanu Prakash Singh, resident of 46/60 Officers Flat, Bailey Road Patna P.O. G.P.O., P.S. Sachivalaya, District, Patna .... .... Petitioners Versus 1. Commissioner Of Income Tax, TDS having its office at 6th Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna 2. Addl. Commissioner of Income Tax, TDS Range, Patna having its office at Lok Nayak Jaiprakash Bhawan, New Dak Bunglow Road, Patna. 3. Asstt. Commissioner of Income Tax, TDS Circle having its office at 6th Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna. 4. Official Liquidator having its office at Maurya Lok, Patna. .... .... Respondents ====================================================== Appearance : For the Petitioner : Mr. D.V. Pathy, Advocate & Mr. Abhi Sarkar, Advocate For the Respondents : Mr. Harshwardhan Prasad, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE And HONOURABLE MR. JUSTICE JYOTI SARAN ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 3 06.05.2011 With the consent of the learned advocates the petition is heard and decided today. Patna High Court CWJC No.7703 of 2011 (3) dt.06-05-2011 2 The petitioner-Bank of Baroda, a nationalized Bank has filed this petition under Article 226 of the Constitution for stay of the demand notice dated 17th March 2011 issued by the Assessing Officer, ACIT, TDS Circle, Patna for recovery of a sum of Rs. 12,63,589/- for the financial year 2007-08. The matter at issue is the liability of the Bank to deduct tax at source from the amount of interest paid by the Bank to the official liquidator attached to the High Court of Patna on the deposits made by the official liquidator. In the proceeding initiated under Section 201 of the Income Tax Act, 1961. The Assistant Commissioner of Income Tax, TDS Circle, Patna held that the Bank had failed to deduct the appropriate amount of tax at source from the interest paid to the official liquidator on the deposits made by the official liquidator. The amount of tax and interest held to be payable came to Rs. 48,89,749/-. In an application for rectification made under Section 154 of the Act, by order dated 9th November 2010 made by the Assistant Commissioner of Income Tax, TDS Circle, Patna the said amount was reduced to Rs. 17,64,630/-. The said amount was further reduced to Rs. 11,43,373/- by order dated Patna High Court CWJC No.7703 of 2011 (3) dt.06-05-2011 3 3rd March 2011 by the Commissioner of Income Tax (Appeals), Dhanbad in Appeal No. 141 of 2010-11. Pursuant to the said order the Assistant Commissioner, Income Tax, TDS Circle, Patna has raised the impugned demand. Feeling aggrieved by the order of the Commissioner of Income Tax (Appeals), Dhanbad the petitioner has preferred appeal before the Income Tax Appellate Tribunal. Pending the said appeal, as the Tribunal is not in session, this petition under Article 226 of the Constitution is filed for stay of the impugned notice of demand pending the Appeal before the Tribunal. Learned Advocate Mr. D.V. Pathy has appeared for the Bank. He has submitted that the money in question is held by the official liquidator in the winding up proceeding of Rohtas Industries Ltd., on behalf of the High Court. The said amount is, therefore, not exigible to Income Tax as envisaged by Article 289 of the Constitution. In support thereof he has relied upon the judgment of the Supreme Court in the matter of J.K.(Bombay)(P)Ltd. versus New Kaiser-I-Hind SPG. Co. Ltd. & Ors. Etc. [AIR Patna High Court CWJC No.7703 of 2011 (3) dt.06-05-2011 4 1970 SC 1041] particularly paragraph 38 thereof. He has further submitted that in any view of the matter pending the winding up proceeding before the Company Court no proceeding could have been initiated in respect of the company’s liability to pay tax without the permission of the Company Court. In support of the submission he has relied upon the provisions contained in Sections 433, 446 and 448 of the Companies Act, 1961 and Section 199 of the Income Tax Act, 1961. On the facts and in the circumstances, the appeal pending before the Tribunal raises substantial questions of law which call for adjudication. The petition is, therefore, allowed. Pending the appeal before the Tribunal there shall be stay of the recovery pursuant to the impugned notice dated 17th March 2011 (Annexure-5 to the petition) The parties will bear their own cost. Bibhash ( R.M. Doshit, CJ.) (Jyoti Saran, J.) "