Appeal by Income Tax did not become infructuous because company was struck off – SC

High Court erred in dismissing appeal of Revenue as infructuous because respondent company had been struck off by the RoC – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 2825 (2019) (03) SC

The instant appeal was filed by the appellant Revenue against the order of the High Court in dismissing the appeal filed by the Income Tax Department on the ground that it had rendered infructuous owing to the fact that the respondent assessee had been struck off from the Register of the Company under Section 560(5) of the Companies Act, 1956. 

The   appellant   Department had filed an appeal under Section 260­A of the Income Tax Act, 1961(the Act) against the order of Income Tax Appellate Tribunal (ITAT).

Ón the last date of hearing when the matter came up before the High Court, the counsel or the appellant, on instruction of the High Court placed a communication from the office of Registrar of Companies (ROC) informing that pursuant to sub ­section (5) of Section 560  of  the  Companies Act, 1956, the name of the respondent company had been struck off from the register and the said company was dissolved.

In the light of the said communication the Hon’ble High Court opined that no purpose was going to be served in examining the substantial question of law which had been raised for its consideration.

Accordingly, the High Court dismissed the appeal of the Revenue as having become infructuous.

The Hon’ble Supreme Court opined that the High Court was wrong in dismissing the appeal as having rendered infructuous.

The Hon’ble Supreme Court observed that the High Court failed to notice 

(a) Section 506(5) proviso (a) of the Companies Act and 

(b) Chapter XV of the Income Tax Act which deals with “liability  in  special  cases”  and  its  clause (L) – Discontinuance of business or dissolution which comprises of the following three sections:

(i) Section 176 – Discontinued business

(ii) Section 177 – Association dissolved or business discontinued

(iii) Section 178 – Company in liquidation

The Hon’ble Supreme Court observed that the said two provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with.

The Hon’ble Supreme Court opined that the High Court did not decide the appeal keeping in view the aforementioned two relevant provisions, the impugned order was not legally sustainable  and  has to be set aside. 

Accordingly, the Hon’ble Supreme Court allowed the appeal of the Revenue and set aside the impugned order and remand the case to the High Court for deciding the appeal afresh on merits in accordance with law.

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