Case Note & Summary
The appeal arose from a judgment of the Rajasthan High Court dismissing the Income Tax Department's appeal under Section 260A of the Income Tax Act, 1961 as infructuous. The High Court had noted that the respondent-assessee company, M/s Gopal Shri Scrips Pvt. Ltd., had been dissolved under Section 560(5) of the Companies Act, 1956, as its name was struck off from the register. The Supreme Court, hearing the Department's appeal, found that the High Court had failed to consider the proviso to Section 560(5) of the Companies Act and Chapter XV of the Income Tax Act, which specifically address the liability of dissolved companies. The Court held that the dismissal was premature and legally unsustainable, as these provisions provide mechanisms to deal with tax liabilities even after dissolution. Consequently, the Supreme Court allowed the appeal, set aside the High Court's order, and remanded the case for a fresh decision on merits, uninfluenced by any observations, with a request to decide the appeal within six months given its age.
Headnote
A) Income Tax Act - Appeal - Dismissal as Infructuous - Dissolution of Company - The High Court dismissed the appeal under Section 260A of the Income Tax Act, 1961 as infructuous because the respondent-assessee company's name was struck off under Section 560(5) of the Companies Act, 1956. The Supreme Court held that the High Court erred in failing to consider the proviso to Section 560(5) of the Companies Act and Chapter XV of the Income Tax Act, which deal with liability in special cases including dissolution. The case was remanded for fresh consideration on merits. (Paras 10-17)
Issue of Consideration
Whether the High Court was justified in dismissing the appeal filed by the Income Tax Department on the ground that it had rendered infructuous because the respondent-assessee company was dissolved under Section 560(5) of the Companies Act, 1956.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned order of the High Court, and remanded the case to the High Court for deciding the appeal afresh on merits in accordance with law, keeping in view the relevant provisions of the Companies Act and the Income Tax Act. The High Court was requested to decide the appeal preferably within six months.
Law Points
- Dissolution of company under Section 560(5) of Companies Act
- 1956 does not automatically render an income tax appeal infructuous
- proviso to Section 560(5) and Chapter XV of Income Tax Act
- 1961 provide for continuing liability
- High Court must consider these provisions before dismissing appeal.
Case Details
Civil Appeal No. 2922 of 2019 (Arising out of S.L.P.(C) No.10639 of 2017)
Abhay Manohar Sapre, Dinesh Maheshwari
A.N.S. Nadkarni (for appellant)
Commissioner of Income Tax, Jaipur
M/s Gopal Shri Scrips Pvt. Ltd.
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Nature of Litigation
Civil appeal against High Court order dismissing income tax appeal as infructuous due to dissolution of respondent-assessee company.
Remedy Sought
Appellant (Income Tax Department) sought setting aside of High Court order and restoration of appeal for merits consideration.
Filing Reason
High Court dismissed the Department's appeal under Section 260A of the Income Tax Act as infructuous because the respondent company was dissolved under Section 560(5) of the Companies Act.
Previous Decisions
Income Tax Appellate Tribunal (ITAT) order dated 28.04.2000 in ITA No. 226/JP/1999; High Court order dated 09.08.2016 dismissing DBITA No.53 of 2000 as infructuous.
Issues
Whether the High Court was justified in dismissing the appeal as infructuous solely on the ground that the respondent-assessee company was dissolved under Section 560(5) of the Companies Act, 1956.
Submissions/Arguments
Appellant (Income Tax Department) argued that the High Court erred in dismissing the appeal without considering the proviso to Section 560(5) of the Companies Act and Chapter XV of the Income Tax Act, which provide for continuing liability of dissolved companies.
Ratio Decidendi
The dissolution of a company under Section 560(5) of the Companies Act, 1956 does not automatically render an income tax appeal infructuous. The proviso to Section 560(5) and Chapter XV of the Income Tax Act, 1961 provide for continuing liability and must be considered before dismissing an appeal on such ground.
Judgment Excerpts
The High Court failed to notice Section 560(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with 'liability in special cases' and its clause (L) which deals with 'discontinuance of business or dissolution'.
In our view, the High Court was wrong in dismissing the appeal as having rendered infructuous.
Procedural History
The Income Tax Department filed an appeal under Section 260A of the Income Tax Act before the Rajasthan High Court against the ITAT order dated 28.04.2000. The High Court dismissed the appeal as infructuous on 09.08.2016 after noting that the respondent company was dissolved under Section 560(5) of the Companies Act. The Department then filed a special leave petition in the Supreme Court, which was converted into Civil Appeal No. 2922 of 2019.
Acts & Sections
- Income Tax Act, 1961: 260A, Chapter XV
- Companies Act, 1956: 560(5)
