JUDGMENT Mukherji, J.
1. This Bench was constituted in order to decide four points, which are enumerated in the order of one of us dated 8th September, 1933. Point 4 alone has been argued because it has been found that the other three points do not arise at the present moment. If point 4 be answered in the negative, the liquidators will have to make a "return," and it is at the time of making the return that questions 1 to 3 would arise. The official liquidators if there be any difficulty, will be at liberty to approach the Hon'ble the Company Judge and obtain direction. When a return has been furnished, it will be for the Income Tax Officer to scrutinize it and to object to any item, if there be one to take exception to. We therefore proceed to decide point 4 on which alone we have been addressed by learned Counsel for the official liquidators and the legal adviser to the income-tax authorities. The point for decision is:
Whether under the Companies Act a liquidator is exempt from making an income-tax return on business managed by him for the beneficial winding-up of the company ?
2. Just a few facts would be necessary to be stated in order to lead up to the questions before us. It appears that there was a limited company doing business in Agra, called the Agra Spinning and Weaving Mills Company, Limited. At the instance of one of the creditors a compulsory winding-up was ordered on 24th June, 1931. Two gentlemen, being advocates of this Court, were appointed official liquidators. Later on it was reported by the official liquidators to the Company Judge that "in the interest of the Company it is necessary that the business of the Company should be carried on ; so permission may be granted to that effect with powers to the official liquidators to dismiss, employ and maintain such staff for the mills as they may consider proper."
3. This report was approved by the learned Company Judge. It appears that since this order was passed on 27th June, 1931, the business of the company as it was carried on before the liquidation, is being carried on under the direction and supervision of the official liquidators. The Income Tax Officer at Agra called on the official liquidators to make a return under Section 22(1), Income Tax Act. There was a large amount of correspondence, and ultimately the official liquidators thought that they were not liable to make any return at all because the company had gone into liquidation. The Income Tax Officer wanted a ruling of the Court on this point, and that is how the point is now before us.
4. We have heard learned arguments on both sides, and we proceed to record our opinion. Under Section 3, Income Tax Act, 1922, every individual, Hindu undivided family, " company" firm and other association of individuals are liable to income-tax. The argument on behalf of the official liquidators is that a company which has gone into liquidation is no longer a " company within the meaning of Section 3, Income Tax Act, and therefore no income-tax can be assessed on the liquidators as representing the company. The word " company " is defined in Section 2(6), Income Tax Act as follows:
'Company' means a company as defined in the Indian Companies Act, 1913....
The Agra Spinning and Weaving Mills Co., Ltd., was therefore a company within the meaning of the Income Tax Act. A company once formed and registered would continue to be a company until it is dissolved under 'Section 194, Companies Act. Prima facie, therefore, a company as defined in Section 2(6), Income Tax Act, would include a company in liquidation.
5. The arguments against this conclusion are these : First of all, it is said that there can be no " principal officer " of a company in liquidation, and unless the " principal officer " of a company in liquidation, can be determined, no tax can be assessed. Reliance is placed on Section 22(1), Income Tax Act, which runs as follows:
The principal officer of every company shall prepare, and, on or before the 15th day of June in each year, furnish to the Income Tax Officer, a return in the prescribed form...
The argument is that if there can be no principal officer of a company in liqudation, there can be no assessment, because the method of assessment laid down in the Income Tax Act cannot be followed. The expression " principal officer " is defined in Section 2(12), Income Tax Act, as follows (we shall read only so much of it as is material for our purpose):
'principal officer' used with reference to... a company . means the secretary, treasurer, manager or agent of... the company, or any person connected with the... company... upon whom the Income Tax Officer has served a notice of his intention of treating him as the principal officer thereof.
6. It is true that when the winding-up order was made the previous officers of the company ceased to hold office, and thus the former secretary, treasurer, manager or agent disappeared from the scene. But we find that the liquidators are actually managing the business of the company, and we may safely take it that the liquidators come under the word " manager " as used in Clause (a), Sub-section (12), Section 2. The word "manager" is defined in the Companies Act as follows:
Manager includes any person occupying the position of a manager, by whatever name called and whether under a contract of service or not.
7. It will, therefore, be noticed that the word " manager" used in Section 2(12), Income Tax Act, has been used in a wide sense and is quite in keeping with the meaning assigned to it in the Companies Act. Further there is no difficulty in treating the official liquidators as the " principal officer " of a company if "the Income Tax Officer serves a notice on them of his intention of treating them as the principal officers of the company, as he has already done in this case. The other arguments advanced against the inclusion of a company in liquidation in the word "company " as used in Section 3, Income Tax Act, are as follows: It is argued that in Section 10, Income Tax Act, certain items are pointed out as being liable to be set off against gross profits or gains of business for the purpose of discovering the net amount on which the tax has to be assessed. It is argued that under Sub-section (2), Section 10, Clause (3), if there be any borrowed capital, the interest paid on such capital is allowed to be deducted from the total income ; but in the case of a company in liquidation which has debts to pay, the interest cannot be paid till the principal amount has been paid off, and thus, although interest may be accumulating, the liquidators would not get the advantage of Clause (3). This argument is easily met by reference to Sub-section (3), Section 10. It is further met in this way. If no interest has been actually paid, the official liquidators may not be entitled under the law to set it off against the income already earned ; but this circumstance is no answer to the question as to whether the liquidators are liable or not to make a return for the purpose of assessment of income-tax. Again, when the interest is paid, say two or three years hence, they would be entitled to set off the interest actually paid against the income then earned.
8. The next argument is that under Clause (9), Sub-section (2). Section 10, a man doing business is entitled to set off against his income any expenditure incurred solely for the purpose of earning such profits or gains ; but in the case of official liquidators it cannot be said that the whole of the expenditure in liquidation has been spent for the purpose of earning such profits or gains. This may be true. What the liquidators have to do is only to apportion a fair amount of the expenditure incurred in the liquidation in order to have it set off against the income earned by the working of the mills. The next argument is that Section 19A, Income Tax Act, makes it a duty of the principal officer of every company to send a statement of the names and addresses of shareholders who have received a dividend. It is argued that this is not possible in the case of official liquidators who have been managing the company which is insolvent. This may be true, but this leads to no conclusion; for there may be companies which are actually working and which are not paying any dividend. These would not be called upon to furnish any statement required by Section 19A, Income Tax Act. Lastly, it was argued that under Sections 40 and 41, Income Tax Act, all persons who were in the position of guardians, trustees or agents of persons residing outside British India, Administrators-General, Official Trustees and receivers or managers appointed by Courts are mentioned as persons liable to pay income-tax on behalf of the parties or properties in their charge, but there is no mention of an official liquidator. This argument is really destructive of the position taken up by the official liquidators. Two remarks may be made on this point. Sections 40 and 41 indicate that it was the intention of the legislature to cast its net, for the purpose of securing income-tax, as wide as possible, and it is impossible to believe that the legislature was forgetful of the fact that there might be companies in "liquidation which were earning profits in the course of liquidation. There could not have been an intention on the part of the legislature to exempt such companies from taxation. If we are not allowed to read the word "company" in Section 3 as including a company in liquidation, surely the official liquidators would come under the word "manager" used in Section 41, Income Tax Act. The word "manager," it is stated in Section 41 itself, includes any person, whatever his designation, who in fact manages property on behalf of another. Within this definition the liquidators must come. Our view is that a company in liquidation is included in the word "company" in Section 3, and it is not necessary to have recourse to Section 41 for the purpose of holding the liquidators liable.
9. It was argued that a company in liquidation would usually be an insolvent company and that may be one of the reasons why the legislature intentionally exempted a company in liquidation from the liability to pay income-tax. But it is not correct to say that only insolvent companies go into liquidation. A perfectly solvent company not burdened with any debt may go into liquidation by special resolution, vide Section 162 (1), Companies Act. It is possible to imagine cases where a company, otherwise in a prosperous condition, may decide to wind up its business. Let us take this case. The sugar factories in Java may be doing very good business, and their main source of income is from exportation of sugar to India. The Indian Government gives protection to sugar by imposing a heavy tax against imported sugar. A prosperous company in Java may find that it would be difficult for it to sell its sugar in India and it may, therefore, decide to wind up its business, although so far the business had been prosperous. Examples like this may be multiplied. Therefore, there is no basis for the argument that every company in liquidation must be working at a loss and cannot earn any profits which may be liable to taxation.
10. One of the arguments advanced on behalf of the liquidators was that if the income-tax authorities assess a tax and it is not paid, they may seek to enforce payment in one of the ways laid down in law against the property of the company in liquidation, but Section 171 would stand in their way of taking any proceedings against the company's property. Two answers can be-given to this argument. The first is that where a tax is justly and legally leviable, there would be no difficulty in obtaining the leave of the Court to enforce payment of the tax. This would satisfy the requirements of Section 171, Companies Act. The second answer is that the right of the Crown to enforce payment of its dues cannot be taken away by a statute which does not expressly enact to that effect. By mere implication the Crown's right and remedy cannot be barred. This was held in the case of West Laikdih Coal Co., Ltd. The view taken there is supported by English decisions. We agree with that view. The result is that we see no difficulty in the way of the income-tax authorities in calling upon the official liquidators to furnish a return in accordance with Section 22 (1), Income-tax Act. This is our answer to the question. We allow counsel for the income-tax authorities one day's fee, which we assess at Rs. 200. He will certify payment of the fee to him within 30 days as required by the rules of the Court.