KALYAN MILLS LTD. versus UNION OF INDIA & ORS.

KALYAN MILLS LTD. versus UNION OF INDIA & ORS.

When appellant-company is indebted to assessee-company with admitted liability and a false counter-claim is set up to avoid payment of tax dues, the Union of India may seek adjudication by a civil court under Section 46(2) and 46(5A) of the Income Tax Act. A receiver may be appointed for recovery. Money decree is permitted only for money lying in deposits; adjustment entries by appellant-company to defeat tax recovery are invalid.

Parties
Appellant: Kalyan Mills Ltd.; Respondent No. 1: Union of India; Respondent No. 2: Assessee Company (public limited company)
Jurisdiction
India
Judgment Date
21 November 1986
Procedural Posture
Civil Appeal / Appeal Before Supreme Court From Gujarat High Court Judgment and Decree Dated 18/19.4.1972
Outcome
Appeal dismissed
Legal Topics
Income Tax Act Section 46(2) and 46(5 A), Recovery of Tax Dues, Money Decree, Appointment of Receiver
Tax Law Civil Procedure Income Tax Act Section 46(2) and 46(5 A) Recovery of Tax Dues Money Decree Appointment of Receiver

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Parties

Kalyan Mills Ltd.

Appellant

Union of India

Respondent No. 1

Assessee Company (public limited company)

Respondent No. 2

Procedural Posture

Civil Appeal / Appeal Before Supreme Court From Gujarat High Court Judgment and Decree Dated 18/19.4.1972

Legal Issues

  1. 1 Whether Union of India can seek decree against appellant-company for recovery of tax dues of an assessee-company under civil suit
  2. 2 Validity of appointment of receiver for recovery in suit
  3. 3 Applicability of Section 46(2) and 46(5A) of the Income Tax Act in civil proceedings

Ratio Decidendi

When appellant-company is indebted to assessee-company with admitted liability and a false counter-claim is set up to avoid payment of tax dues, the Union of India may seek adjudication by a civil court under Section 46(2) and 46(5A) of the Income Tax Act. A receiver may be appointed for recovery. Money decree is permitted only for money lying in deposits; adjustment entries by appellant-company to defeat tax recovery are invalid.

Court Disposition

Appeal dismissed

Orders

  • Appointment of receiver to recover and pay amount to Union of India
  • Costs awarded against appellant