B. J. DIVAN, B. K. MEHTA, J. ( 1 ) THE question of law which arises in both these matters is regarding the preferential claims under sec. 530 (1) (a) of the Companies Act. Under that section in a winding up there shall be paid in priority to all other debts inter alia all revenues taxes cesses and rates due from the Company to the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-sec. (8) of sec. 530 and having become due and payable within the twelve months next before that date. Company Application No. 26 of 1973 came up for hearing before B. K. Metha J. on October 11 1973 In this application priority is claimed by the Income-tax Department in respect of certain dues. At the same time priority is also claimed in respect of certain sales-tax liability of the Company in liquidation on behalf of the State Government and in the Company Application the main question is whether and if so to what extent priority can be recognised for the liabilities for income-tax and sales-tax dues. When the matter came up for hearing before B. K. Mehta J. his attention was drawn to the decision of D. A. Desai J. in Company Application No. 94 of 1973 in Company Petition No. 21 of 1966 being the matter of SALES TAX OFFICER PETLAD V. RAJRATNA NARANBHAI MILLS COMPANY LIMITED. B. K. Metha J. was unable to agree with the conclusions reached by D. A Desai J in Rajratna Naranbhai Mills Companys case and hence he referred the matter to a larger Bench so that the entire question may be decided. ( 2 ) BEFORE this Company Application No. 26 of 1973 could be taken up for final hearing appeal filed by the Sales-tax Officer Petlad in Rajratna Naranbhai Mills Companys case being O. J. Appeal No. 2 of 1975 became ripe for hearing and since the question in both the matters is the same we have board both these matters together and we are disposing of both these matters by this common judgment. ( 3 ) BEFORE we proceed with the specific facts of each case it will be necessary to set out some of the relevant provisions of the Companies Act. Under sec. ( 3 ) BEFORE we proceed with the specific facts of each case it will be necessary to set out some of the relevant provisions of the Companies Act. Under sec. 528 of the Companies Act 1956 provision is made for admitting to proof claims against a Company in winding up proceedings; It provides that in every winding up all debts payable on a contingency and all claims against the Company present or future certain or contingent ascertained or sounding only in damages shall be admissible to proof against the Company a just estimate being made so far as possible of the value of such debts or claims as may be subject to any contingency. or may sound only in damages or for some other reason may not bear a certain value. Sec. 529 provides for application of insolvency rules in winding up of insolvent companies. But the provision which requires consideration in this case is sec 530 sub-sec. (1) (a) which provides for preferential payments. Sec. 530 (1) (a) is in these terms-530 (1) In a winding up there shall be paid in priority to all other debts- (a) all revenues. taxes cesses and rates due from the Company to the Central or a State Government or to a Local authority at the relevant date as defined in clause (c) of sub-sec (8) and having become due and payable within the twelve months next before that date. Under sub-sec. (8) of sec 530 for the purposes of sec. 530- (c) the expression the relevant date means- (i) in the case of a company ordered to be wound up compulsorily the date of the appointment. Of a provisional liquidator or if no such appointment was made. the date of the winding up order unless in either case the company had commenced to be wound up voluntarily before that date; and (ii) in any case where sub-clause (i) does not apply the date of the passing of the resolution for the voluntary winding up of the companythe Company with which we are concerned in Company Application No 26 of 1973 was taken into voluntary liquidation and the relevant resolution as contemplated by sec 530 (8) (c) (ii) was passed on August 30 1968 and that date is the relevant date with reference to which the provisions of sec. 530 (1) (a) will have to be considered. 530 (1) (a) will have to be considered. The main controversy in this case is as to what is the meaning of the words due and payable when sec. 530 (1) (a) says that the taxes cesses and rates which are to be given a preference under sec 530 (1) (a) must have become due and payable within the twelve months next before the relevant date. it also says that not only they must become due and payable within the twelve moths immediately preceding the relevant date but they must be due from the Company either to the Central Government or to the State Goverment or to a local authority at the relevant date. Thus sec. 530 (1) (a) lays down two conditions firstly that the taxes cesses etc. must be due from the Company at the relevant date and secondly the taxes cesses etc. must have become due and payable within the twelve months immediately preceding the relevant date. ( 4 ) THE decision of D. A. DESAI J. IN SALES TAX OFFICER V. RAJRATNA NARANBHAI MILLS CO. IS NOW REPORTED IN (1974) 44 COMP. CAS. 65 and the view that he took was that the word due implies or conveys different meaning in the juxtaposition in which it is used in the two parts of the same clause. The word due in the first part of the clause must mean outstanding at the relevant date. When it occurs in the expression having become due in the later part of the clause it means that the event which brought the debt into existence occurred and also it became payable meaning thereby that its payment could have been enforced against the company within twelve months before the relevant date that is the date of the order of winding up. There specific conditions are prescribed in the clause a and all the three must coexist and be satisfied in respect of any particular debt for which priority is claimed. The three conditions are: (1) debt of the kind mentioned in the clause must be outstanding on the relevant date; (2) the debt must have become due in the sense that it must have been incurred at any time within twelve months next before the relevant debt and (3) the debt must have become payable at any time within twelve months next before the relevant date. The main Challenge Oil behalf of the taxation authorities both Sales-tax and Income-tax authorities is to this interpretation placed by Mr. Justice D. A. Desai on the words due and due and payable. The question that we have to ask ourselves is whether the splitting up of the words due and payable occurring in the phrase due and payable towards the end of sec. 530 (1) (a) is in accordance with the legal principles laid down by several decisions of the different Courts. ( 5 ) BEFORE we go on to the discussion of the different authorities on this point we must mention that as far back as 1946 in GOVERNOR CENTRAL IN COUNCIL V. SHIROMANI SUGAR MILLS LTD. (1946) 16 COMP CAS. 71 the Federal Court had held that in the winding up of a Company the Crown is not entitled to any priority prerogative or preferential treatment except to the extent provided for in the Indian Companies Act in particular by secs. 230 and 232 of the Indian Companies Act 1913 We are at present concerned with the provisions of sec 530 (1) (a) of 1956 Act which is equivalent to sec. 230 (1) (a) of 1913 Act and so far as the question before us is concerned the provisions of sec. 230 (1) (a) of the Act of 1913 were in identical terms with the provisions of sec. 530 (1) (a) of the 1956 Act. ( 6 ) IN BUILDERS SUPPLY CORPORATION V. UNION OF INDIA A. I. R. 1965 S. C. 1061 Gajendragadkar C. J. delivering the judgment of the Supreme Court has referred to the common law doctrine and in paragraph 12 at page 1066 he has observed in construing the relevant provisions of sec. 46 the High Courts in India have had frequent occasions to consider whether the Government of India is entitled to claim priority for arrears of income-tax due to it from assessees over the private debts due from them to their creditors and this claim has been consistently upheld At the same time it has been pointed out with reference to the decision of the Federal Court in GOVERNOR GENERAL IN COUNCIL V. SHIROMANI SUGAR MILLS LTD. (SUPRA) IN PARAGRAPH 26 AT PAGE 1070. (SUPRA) IN PARAGRAPH 26 AT PAGE 1070. IT would be noticed that this conclusion postulates the applicability of the doctrine of priority of the debts due to the Crown and holds that as a result of the specific provision contained in sec. 230 (1) (a) the said doctrine must be worked in the manner prescribed by the said section and not outside it. ( 7 ) COMING now to the meaning of the words due and due and payable we find that these words have been interpreted by the Courts in India and abroad in the context both of Companies Act and similar provisions of the Insolvency Acts and Bankruptcy Acts. The provisions of the Companies Act 1929 in England relating to priority of some debts in winding up proceedings of a Company were in identical terms with the provisions of sec. 530 (1) (a) of the Companies Act 1956 In re AIREDALE GARAGE COMPANY LIMITED ANGLO SOUTH AMERICAN BANK V. THE COMPANY (1933) 1 CH. 64 AT PAGE 78 LORD HANWORTH M. R. observedi think the words due and payable in sec. 264 of the Companies Act are meant to refer to a liability in respect of which there had to be a payment. and the particular debt for additional rates must be deemed to have become due and payable within the period of the twelve months next before the relevant date. ( 8 ) IN KESORAM INDUSTRIES and COTTON MILLS LTD. V. COMMISSIONER OF WEALTH-TAX (1966) 59 I. T. R: 767 the question before the Supreme Court was the meaning to be attached to the words debt owed and debt occurring in Wealth Tax Act. While considering this question at page 779 of the report Subba Rao J. delivering the majority judgment has observedthe decision of a Full Bench of the Calcutta High Court in BANCCHARAM MOJUMDAR V. ADYANATH BHATTACHARJEE I. L. R. 36 CAL. 936 throws considerable light on the connotation of the word `debt. Jenkins C. J. defined that word thus: i take it to be well established that a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation. Mookerjee J. quoted the following passage with approval from the judgment of the Supreme Court of California in PEOPLE V. ARGUELLO (1869) 37 CALIF. Mookerjee J. quoted the following passage with approval from the judgment of the Supreme Court of California in PEOPLE V. ARGUELLO (1869) 37 CALIF. 521: ` standing alone the word debt is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two we say of the former that it is a debt owing and of the latter that it is a debt due. In other words debts are of two kinds: solvendum in preasenti and solendum in futuro sum of money which is certainly and in all events payable is a debt without regard to the fact whether it be payable now or at a future time. A sum payable upon a contingency however is not a debt or does not become a debt until the contingency has happened. IT must be noticed that this passage from the decision of the Supreme Court of California in People v. Arguello distinguishes between a debt which is payable in future in the sense of a sum of money which has been promised at a future day and between debt in the sense of a sum of money which is presently due and payable. This passage also emphasizes that the word debt in the sense of a sum of money which is presently due and payable is described as a debt due whereas the sum of money which has been promised to be paid at a future date is a debt owing. This passage also makes it clear that it is only when a sum of money is presently due and payable that it can be said to be debt due other wise it will not be described as a debt due. Thus according to this passage which was appoved by the Supreme Court in Kesoram Industries case (supra) the word due in the context of a debt or financial liability is equal to due and payable which in its turn is equivalent to presently payable. ( 9 ) THAT this is the only way to interpret the words due and due and payable is borne out by the decision of the Supreme Court in UNION OF INDIA V. RAMAN IRON FOUNDRY A. I. R. 1974 S. C. 1265. ( 9 ) THAT this is the only way to interpret the words due and due and payable is borne out by the decision of the Supreme Court in UNION OF INDIA V. RAMAN IRON FOUNDRY A. I. R. 1974 S. C. 1265. In that case Bhagwati J. delivering the judgment of the Supreme Court observed in the context of the phrase recovery of sums due and said now a sum would be due to the purchaser when there is an existing obligation to pay it in praesenti. It would be profitable in this connection to refer to the concept of a debt for a sum due is the same thing as a debt due. The classical definition of debt is to be found in WEBB V. STENTON (1883)11 QBD 518 where Lindley L. J. said. . a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation. There must be debitum in praesenti solvendum may be in praesenti or in futuro that is immaterial. There must be an existing obligation to pay a sum of money now or in future. THEN the passage from the decision of the Supreme Court of California in People v. Arguello (supra) which we have set out hereinabove as approved by the Supreme Court in Kesoram Industries v. Commissioner of Wealth-tax (supra) was cited and after citing that passage Bhagwati J. has observed this passage indicates that when there is an obligation to pay a such of money at a future date it is a debt owing but when the obligation is to pay a sum of money in praesenti it is a debt due. A sum due would therefore mean a sum for which there is an existing obligation to pay in preasenti or in other words which is presently payable. A sum due would therefore mean a sum for which there is an existing obligation to pay in preasenti or in other words which is presently payable. IT is in this context that we have to consider the schemes of the Income-tax Act and the Sales-tax Act to ascertain when income-tax under the Indian Income-tax Act or Sales-tax under the scheme of the Central Sales Tax Act or the State Sales-tax Act can be said to be due in the sense we have now explained that is in the sense of a sum of money payable in praesenti or to put it in the words of the Supreme Court a sum for which there is an existing obligation to pay a such of money presently which in other words is presently payable. ( 10 ) UNDER the scheme of the Indian Income tax Act there are provisions now in sec. 140 A for self assessment that is the liability to pay the tax on the amount shown in the income-tax return and the amount is to be paid within a particular period after the filing of the return There is also provision for provisional assessment to be made by the Income-tax Officer (Sec. 141 ). There is provision for summary assessment under sec. 132 when as a result of some search any money bullion jewellery or other valuable article or thing is seized under sub sec. (1) of sec 132 There is also provision for advance payment of tax and also provision for deduction of tax at source but it is only when the final order in regular assessment proceedings is passed and after giving credit to the assessee for any payments made by him towards the dues for a particular year and amounts are adjusted and the demand notice is issued and then it can be said that income-tax for that particular assessment year has become due in the sense of become presently payable. ( 11 ) IN DOORGA PROSAD V. SECRETARY OF STATE (1945) 13 I. T. R. 285 Sir John Beaumont delivering the opinion of the Privy Council has observed at page 289 of the reportin their Lordships opinion although income-tax may be popularly described as due for a certain year it is not in law so due. ( 11 ) IN DOORGA PROSAD V. SECRETARY OF STATE (1945) 13 I. T. R. 285 Sir John Beaumont delivering the opinion of the Privy Council has observed at page 289 of the reportin their Lordships opinion although income-tax may be popularly described as due for a certain year it is not in law so due. It is calculated and assessed by reference to the income of the assessee for a given year but it is due when demand is made under sec. 29 and sec. 45. It then becomes a debt due to the Clown but not for any particular period. THE scheme of the Income-tax Act 1961 does not differ in this connection from the scheme of the Indian Income-tax Act 1922 with reference to which the Privy Council made this observation and hence so far as income-; tax is concerned the tax for a particular assessment year becomes a debt due to the Crown only when the income-tax is calculated and assessed by reference to the income of the assessee for that particular year under consideration and thereafter the demand is made under the relevant provi- sions of the Income-tax Act. It is only then that it becomes a debt due to the Crown and a debt due means as pointed out above a debt which is presently payable which can be enforced and which is the same thing as pointed out by People v. Arguello (supra) as due and payable. ( 12 ) MR. A. L. Shah who appears for the Liquidator in 0. J. Appeal No. 2 of 1975 has urged before us that the Legislature has used in the context of the priority of debts two distinct sets of words debt due and due and payable and proper meaning should be given to these sets of words namely debt due and due and payable and a distinction must be made when the Legislature has used two different terminologies namely due in the beginning of the clause and due and payable at the end of the clause. He also wants us to dissect the phrase due and payable and he wants to emphasize that the debt must have become due in the narrower sense of the word of having come into existence and having been payable with reference to enforceability of payment and in this sense relying upon the decision of D. A. Desai J. he has urged before us that the debt must be existing at the relevant date and the event which brought the debt into existence must have occurred within twelve months preceding the relevant date and it must also have become payable meaning thereby that its payment could have been enforced against the Company within twelve months before the relevant date. In view of the decisions that we have already referred to particularly the passage from People v. Arguello (supra) as approved by the Supreme Court in Kesoram Industries Case (supra) and in Raman Iron Foundrys case (supra) it is not possible for us to accept this contention of Mr. Shah. In our opinion the only meaning that could be attached to the word due occurring in sec. 530 is that it must be presently due and the words due and payable mean the same thing namely that it must be presently payable. Therefore so far as sec. 530 (1) (a) is concerned the revenue tax cess or rate due from the Company to the Central or State Government or to a local authority must be presently payable that is that the liability could be enforced as at the relevant date and secondly it must have so become presently payable within twelve months immediately preceding the relevant date. ( 13 ) IN support of his argument Mr. Shah very strongly relied upon certain observations of Sinha J. in In re RECOLS (INDIA) LIMITED (1953) 23 COMP. CAS. 380. We find from the report that the Bench which decided the matter consisted of three learned Judges Chakravarti C. J. Lahiri J. and Sinha J. Chakravarti C. J. and Lahiri J. agreed and Sinha J. delivered a separate but concurring Judgment. The interpretation which Mr. Shah wants us to put on the words due and payable occurring in sec. 530 (1) (a) is to be found in the judgment of Sinha J. only. Chakravarti C. J. in his judgment has referred to the decision of the Privy Council in Doorga Prosad v. Secretary of State. The interpretation which Mr. Shah wants us to put on the words due and payable occurring in sec. 530 (1) (a) is to be found in the judgment of Sinha J. only. Chakravarti C. J. in his judgment has referred to the decision of the Privy Council in Doorga Prosad v. Secretary of State. (supra) and applied the principle of that decision to Sales-tax Act. After referring to the decision in Doorga Prosads case Chakravarti C. J. proceeded to consider the question whether the principle enunciated as to income tax could be applied to the Bengal Sales Tax Act and observed:there seem to be no reason why the principle should not apply to sales tax due under an assessment because the position as to assessed tax under two Acts is precisely the same. Under both the Acts the liability to pay the relevant tax accrues before an assessment is made under the Bengal Act and in the case of a registered dealer as soon as a taxable sale is made and under the Indian Act as soon as a persons income reaches the taxable limit. Returns are to be filed under both the Acts. Under the Income-tax Act an assessment is made under sec. 23 then a notice of demand is to be served on the assessee under sec. 29 specifying the amount of tax payable under the order of assessment and under sec. 45 the amount is to be paid within the time mentioned in the notice or if a time is not so mentioned within the other period mentioned in the section failing which the assessee is to be deemed to be in default Under the Bengal Act an assessment is made under sec. 11 read with Rule 54 then a notice of demand is to be served under Rule 55 and under sec. 11 (3) the amount of the demand must be paid by such date as may be specified in the notice. It is true that under the Indian Act an assessment is to be made in all cases but under the Bengal Act only when no return is furnished or when the return furnished appears to be incorrect and incomplete but those two cases are provided for in the Indian Act in sec. 23 (4) and sec. It is true that under the Indian Act an assessment is to be made in all cases but under the Bengal Act only when no return is furnished or when the return furnished appears to be incorrect and incomplete but those two cases are provided for in the Indian Act in sec. 23 (4) and sec. 23 (3) and the effect of an assessment and the steps to be taken subsequently are common to all types of assessment under the section. In the case before the judicial Committee the assessment was one under sec. 23 (4 ). In view of the complete identity between the provisions of the two Acts regarding assessed taxes I see no reason why the principle enunciated by the Judicial Committee should not apply to the sum of Rs. 759-8-9 involved in the present case which is due under an assessment (for sales tax ). Mr. Chaudhuri contended that there was some difference between the two Acts in that an assessee not paying the assessed income tax within the time mentioned in sec. 45 of the Income-tax Act was to be deemed a defaulter whereas there was no such provision in the Bengal Act or the rules framed thereunder. I do not think that it was the presence of the words in default in sec. 45 which was the reason for the Judicial Committees view that the tax was due when a demand was made under Secs 29 and 45 for in the first place if a person liable to pay a debt does not pay it by the date fixed for payment he becomes a defaulter without any statute declaring him to be so and in the second place what their Lordships say is that the tax becomes due when a notice of demand is made and not that it becomes due when it is not paid by the date fixed for payment and thereby a default is committed Lastly the principle that where a tax has to be assessed it does not become either due or payable till at least an assessment is made is one of general application am accordingly of opinion that there is nothing in the Bengal Finance (Sales Tax) Act to exclude the operation of the principle laid down by the Judicial Committee on tax assessed under it. SINHA J. on the other hand held : sales tax from a dealer chargeable under the Bengal Finance (Sales Tax) Act 1941 is due immediately upon his gross turnover exceeding the taxable quantum during the period prescribed by the Act For determining the taxable turnover all due allowances must be made under secs. 5 and 6 of the Act. But as soon as there is a taxable turnover the tax is due. BUT the sales tax payable under the Act becomes payable as follows:- (a) Where the dealer has filed his return under sec. 10 (2) and as a condition precedent paid in the amount admitted in the return when the return was filed and to the extent admitted therein. This however will not apply to any excess paid because to that extent it is not a tax payable under the Act and the question does not arise (b) Where the dealer has not filed a return or filed a return which is not correct or complete then as to the amount assessed under sec. 11 (1) and (2) or the amount so assessed less the amount already paid under sec. 10 (3) together with penalties if any payable under the Act immediately upon the notice under sec. 11 (3) being served upon him in the prescribed form. ( 14 ) IN our opinion Chakravarti C. J. has correctly emphasized in the majority judgment that the tax both under the Sales-tax Act and the Income-tax Act is precisely the same and nothing has been pointed out to us from the provisions. of the Bombay Sales Tax Act which would distinguish the scheme of the Bombay Sales Tax Act from the similar scheme of the Bengal Sales Tax Act. The tax becomes due and payable when the tax has been assessed and a notice of demand for the payment of the tax is served upon the assessee or the dealer concerned It is only in this sense that the word has to be interpreted. ( 15 ) MR. Kaji who appeared on behalf of the Income-tax authorities has relied upon the non-obstante clause in sec. 178 (6) of the Income-tax Act 1961 Under sec. ( 15 ) MR. Kaji who appeared on behalf of the Income-tax authorities has relied upon the non-obstante clause in sec. 178 (6) of the Income-tax Act 1961 Under sec. 178 sub-sec (1) every person who is the liquidator of any company which is being wound up whether under the orders of a Court or otherwise or who has been appointed the receiver of any assets of a Company shall within thirty days after he has become such liquidator give notice of his appointment as such to the Income-tax Officer who is entitled to assess the income of the Company. Under sub--sec. (2) the Income-tax Officer shall after making such enquiries or calling for such information as he may deem fit notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which in the opinion of the Income-tax Officer would be sufficient to provide for any tax which is then or is likely thereafter to become payable by the Company. Under sub-sec. (3) the liquidator shall not without the leave of the Commissioner part with any of the assets of the Company or the properties in his hands until he has been notified by the Income-tax Officer under sub-sec. (2) and on being so notified shall set aside an amount equal to the amount notified and until he so sets aside such amount shall not part with any of the assets of the company or the properties in his hands. Sub-sec. (6) provides that the provisions of sec. 178 shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force. Mr. Kaji in this connection has drawn our attention to the Commentaries at page 942 of the Sixth Edition of Kanga and Palkhivala on Income-tax where the relevant passage reads:the provisions of sec. 178 do not have any bearing on the question of priority for the companys tax dues. They do not confer on the Government any higher- rights or wider priorities than those enjoyed by the Government under the Company law. 178 do not have any bearing on the question of priority for the companys tax dues. They do not confer on the Government any higher- rights or wider priorities than those enjoyed by the Government under the Company law. Sec. 178 is enacted for the very limited purpose of ensuring that the Governments existing rights and priorities under the law are not defeated by sale of the Companys assets or distribution among the share-holders or creditors who under the Companies Act are not entitled to be paid before the Government. If the assets of the Company in liquidation ale insufficient to pay the unsecured creditors in full the administration must be in accordance with the aforesaid provisions of sec. 530 of the Companies Act 1956 under which the Governments right to priority (a) is no higher than that of other specified preferential creditors and (b) is limited to tax which had become due and payable within the twelve months next before the date of winding up. Sub-sec. (6) of sec. 178 which provides that the provisions of that section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force does not militate against the view stated above. Since the provisions of that section do not affect or alter the existing law of priorities it is obvious that there is nothing in sec. 178 to override the provisions for preferential payments contained in sec. 530 of the Companies Act. In Sampath Iyengars Book on the Law of Income-Tax Sixth Edition at page 1732 with reference to sec. 178 (6) it has been stated :this is an important provision in this connection It states that the directions contained in sec. 178 shall supervene any other law for the time being in force. 530 of the Companies Act. In Sampath Iyengars Book on the Law of Income-Tax Sixth Edition at page 1732 with reference to sec. 178 (6) it has been stated :this is an important provision in this connection It states that the directions contained in sec. 178 shall supervene any other law for the time being in force. The reference is to the provisions of the Indian Companies Act 1956 Sec. 530 (1)- (a) of that Act grants priority for the tax due to the Government only in so Par as it has become due and payable within the twelve months next befores the date of the appointment of a provisional liquidator or the date of the winding up order (where there has been no appointment of a liquidator) in the case of a compulsory winding up and where the winding up is voluntary the date of the resolution for the voluntary winding up-designated as relevant date by clause (c) of sec 530 Under the provisions of the Income-tax Act a tax becomes payable only after a notice of demand is served upon the assessee under sec. 156. So the priority under the Companies Act is restricted to cases where the notice of demand for payment of tax has been served under sec. 156 within the period of one year immediately preceding the relevant date. Consequence is that though an order of assess- ment might have been made before the commencement of the winding up still no priority would attach to such tax unless the notice of demand under sec. 156 there for had been served upon the Company within the period of the one year as mentioned above. . . . . . . this section secures to the Revenue priority of payment over all unsecured creditors of taxes payable in respect of all periods upto the date of the commencement of the liquidation or the date of the appointment of a receiver. In respect of the taxes due if any for years subsequent to the commencement of the liquidation or subsequent to the appointment of a receiver there is no provi sion made in this Act or in the Companies Act. WITH respect to the learned author of Iyengar on Income-tax it must be said that his interpretation of the provisions of sec. 178 (6) is not correct. There is nothing in sec. 178 about priority of payments. WITH respect to the learned author of Iyengar on Income-tax it must be said that his interpretation of the provisions of sec. 178 (6) is not correct. There is nothing in sec. 178 about priority of payments. Priority of payment is provided for in the Companies Act and not in the Income-tax Act. All that sec. 178 requires is that the Liquidator should inform the Income-tax Officer concerned that he has been appointed as such from a particular date. The Income tax Officer has to intimate under sub-sec. (2) within three months from the date on which he receives notice of the appointment of the liquidator the amount which in the opinion of the Income- tax Officer would be sufficient to provide for any tax which is then or is likely thereafter to become payable by the Company. The Liquidator has not to part with any of the assets of the Company without the leave of the Co- mmissioner until he has been notified by the Income-tax Officer under sub sec. (2) and on being so notified shall set aside an amount equal to the amount notified and until he so sets aside such amount shall not part with any of the assets of the Company or the properties in his hands. If the Liquidator fails to act in accordance with the section or fails to set aside the amount as required by sub-sec. (3) or parts with any of the assets of the Company or the properties tn his hands in contravention of the provi- sions of that sub section he becomes personally liable for the payment of the tax which the Company would be liable to pay. Throughout the section there is nothing which says that apart from keeping aside these properties or assets sufficient to meet the possible tax liabilities of the Company the liquidator in liquidation proceedings has to give priority to the income-tax liability in an order of priority different from the order of priority mentioned in sec. 530 (1) (a) of the Companies Act. Therefore the non-obstante clause in sec. 178 (6) does not interfere in any manner with the order of priorities laid down in sec. 530 (1) (a) of the Companies Act and it must be pointed out that sec. 17 or the Central Sales Tax Act 1956 is in terms similar to sec. 530 (1) (a) of the Companies Act. Therefore the non-obstante clause in sec. 178 (6) does not interfere in any manner with the order of priorities laid down in sec. 530 (1) (a) of the Companies Act and it must be pointed out that sec. 17 or the Central Sales Tax Act 1956 is in terms similar to sec. 178 of the Income-tax Act and there also it has been provided that the provisions of sec. 17 shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force. Word for word sec. 17 of the Central Sales Tax Act is equivalent to sec. 178 of the Income-tax Act 1961 and for the reasons that we have stated above the same principle has to be followed. ( 16 ) IN KONDASKAR OFFICIAL LIQUIDATOR V. DESHPANDE INCOME-TAX OFFICER (1972) 83 I. T. R. 685 the Supreme Court has dealt with the powers of the Court dealing with liquidation matters. At page 699 of the report Dua J. delivering the judgment of the Supreme Court has observedthe argument that the proceedings for assessment or re-assessment of a Company which is being wound up can only be started or continued with the leave of the liquidation Court is also on the scheme both of the Act and of the Income-tax Act unacceptable. We have not been shown any principle on which the liquidation Court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the Company which is being wound up. The liquidation Court would have full power to scrutinise the claim of the revenue after income-tax has been determined and its payment demanded from the liquidator. It would be open to the liquidation Court then to decide how far under the law the amount of income-tax determined by the department should be accepted as a lawful liability on the funds of the Company in liquidation. At that stage the windingup Court can fully safeguard the interests of the company and its creditors under the Act. Incidentally it may be pointed out that at the bar no English decision was brought to our notice under which the assessment proceedings were held to be controlled by the winding-up Court. On the view that we have taken the decisions in the case of SETH SPINNING MILLS LTD. Incidentally it may be pointed out that at the bar no English decision was brought to our notice under which the assessment proceedings were held to be controlled by the winding-up Court. On the view that we have taken the decisions in the case of SETH SPINNING MILLS LTD. (IN LIQUIDATION) (1962) 46 I. T. R. 193 and the MYSORE SPUN SILK MILLS LTD. (IN LIQUIDATION) (1968) 68 I. T. R. 295 (being both decisions of the Mysore High Court) do not seem to lay down the correct rule of law that the Income-tax Officers must obtain leave of the winding up Court for commencing or continuing assessment or reassessment proceedings. THUS according to this decision in Kondaskars case it is obvious that the powers of the liquidation Court are very wide and according to this decision of the Supreme Court after the assessment for income-tax has been completed and the demand notice has been issued and the payment of the tax has been demanded from the liquidator it would be open to the liquidation Court then to decide how far under the law the amount of income-tax determined by the Department should be accepted as a lawful liability on the funds of the Company in liquidation. The discussion so far clearly establishes that so far as dues for income-tax are concerned it is only when the regular assessment as distinguished from provisional assessment or summary assessment or an assessment for the purpose of advance tax or a self assessment has been made and a notice of demand for tax is issued that the income-tax can be said to be due and payable. According to the decision of Chakravarti C. J. in Recol (India) Limited case (supra) with which we are in entire agreement the same principles would apply in the case of sales tax also. ( 17 ) IN KEDARNATH JUTE MFG. CO. LTD. V. COMMISSIONER OF INCOME-TAX. (1971) 82 I. T. R. 363 Grover J delivering the judgment of the Supreme Court has observed-NOW under all sales tax laws including the statute with which we are concerned the moment a dealer makes either purchases or sales which are subject to taxation the obligation to pay the tax arises and taxability is attracted. Although that liability cannot be enforced till the quantification is effected by assessment proceedings the liability for payment of tax is independent of the assessment. Although that liability cannot be enforced till the quantification is effected by assessment proceedings the liability for payment of tax is independent of the assessment. IT is true that in this passage the distinction between taxability and the obligation to pay tax on the one hand and enforceability of that tax liability so far as sales-tax liabilities are concerned. has been emphasized but what we are concerned with is not when the obligation to pay the tax arises but as to from what date the sales-tax becomes presently payable. It becomes presently payable only when it can be enforced and it can only be enforced when the quantification is effected by the assessment proceedings and the demand notice under the Sales-tax Act is issued. Till that moment though there may be an obligation to pay in future it cannot be said to be a tax due in the sense of tax presently payable or the payment of which can be enforced as on a particular date. It is only with words due and due and payable occurring in sec. 530 (1) (a) that we have to deal in this particular case. ( 18 ) MR. Shah has also relied upon the decision of the Mysore High Court in INCOME-TAX OFFICER V. OFFICIAL LIQUIDATOR (1967) 63 I. T. R. 810 and he has relied upon the following passage of the decision of the single Judge of the Mysore High Court at page 812 of the report:reliance was sought to be placed on a ruling of the Patna High Court in the matter of BIHAR BOLTS AND RIVETS AND ENGINEERING WORKS (IN LIQUIDATION) (1959) 29 COMP. CAS. 482. The tax dealt with there was sales tax and the question was whether the tax claimed was within the ambit of sec. 530 (1) (a) of the Companies Act. It appears to have been argued that the tax had not become due within twelve months next before the winding up though it might be said to have become payable within that period. The argument was rejected with the following observations:mr. Sreenath Singh has contended that the amount Rs. 7 934 due to the sales-tax department is not entitled to priority because it did not become due during the period of 12 months next before the relevant date. I am of opinion that this contention is without substance. The argument was rejected with the following observations:mr. Sreenath Singh has contended that the amount Rs. 7 934 due to the sales-tax department is not entitled to priority because it did not become due during the period of 12 months next before the relevant date. I am of opinion that this contention is without substance. Sec. 530 (1) (a) of the new Act does not require that a claim must become due as well as payable within the period of twelve months. In my judgment its requirements are satisfied if the co-existence of both occurs for the first time within the period. Even if the amounts of sales tax for the three years in question were due from before the period of twelve months they were not payable previously. As they first became payable within that period having already been due from before I hold that the entire amount of Rs. 7 934 ought to be treated as a preferential claim and to be paid in priority to ordinary debts. THE question whether the said interpretation of the sub-section is quite accurate or may require further scrutiny need not be gone into in this application because upon facts the income-tax claimed in this application had become both due and payable long before the period of twelve months immediately preceding the winding up order. THE decision of the Patna High Court is also reported (In the matter of BIHAR BOLTS and RIVETS ENGG. WORKS LIQ. (1959) 29 COMP. CASE 482) A. I. R. 1959 PATNA 534 and there following the decision of Sinha J. in Recols (India) Limited case (supra) L. Sahai J. has observed: -. . . . that the words due and payable are not synonymous. As soon as one person owes a certain amount to another the amount is due from the former to the latter. If a date is fixed for payment of the amount it does not become pay able and the debtor cannot be compelled to pay before that date. Sales tax becomes due for each transaction of sale immediately after the sale is effected. To the extent of the liability admitted in a return the amount of tax is payable before the dealer submits that return. No question of subsequent recovery of such a sum arises as it is paid even before the return is filed. Under sub-sec. (4) of sec. To the extent of the liability admitted in a return the amount of tax is payable before the dealer submits that return. No question of subsequent recovery of such a sum arises as it is paid even before the return is filed. Under sub-sec. (4) of sec. 14 of the Bihar Sales Tax Act however the amount of sales-tax assessed under sec. 13 less the amount already paid by the dealer is payable by a date specified in a notice issued by the Commissioner for payment. No amount which remains unascertained and no amount which is not legally recoverable by the claimant or creditor can be said to be payable. Until final assessment order has been passed declaring the amount that a dealer must pay as tax in excess of the liability admitted by him in his return no one can be certain of the figure. Hence the amount becomes ascertained only when the final assessment authority quantifies it. That amount be comes legally recoverable only when a notice is issued by the Commissioner as provided for in sub-sec. (4) of sec. 14. WHILE dealing with the decision of the Calcutta High Court in Recols (India) Ltds. case (supra) we have already indicated that we prefer to accept the reasoning of Chakravarti C. J. in preference to the reasoning of Sinha J. for the reasons already stated and therefore with great res- pect to the learned Judges of the Patna and Mysore High Courts we are unable to follow their conclusions. ( 19 ) IN Sales-tax officer v. Official Liquidator (1968) 38 Comp. Cas. 430 a Single Judge of the Allahabad High Court has held that under sec. 530 (1) (a) the tax etc. should have become due within the period of 12 months immediately preceding the date of the winding up and that they should also have become payable within that period. Both these conditions must co-exist before the priority mentioned therein can be claimed. The section envisages revenue sales-tax etc. currently due and payable at the time of the winding up order and does not include within its ambit arrears of the same. The word revenues used in the provision means those which have become due and payable as revenues within the relevant period and not revenues which are recoverable as arrears of land-revenue. The section envisages revenue sales-tax etc. currently due and payable at the time of the winding up order and does not include within its ambit arrears of the same. The word revenues used in the provision means those which have become due and payable as revenues within the relevant period and not revenues which are recoverable as arrears of land-revenue. Now a reference to the dates mentioned in the decision of the learned Single Judge makes it clear that the relevant date in that particular case was August 7 1963 and the different assessment orders were passed either before August 7 1962 or after August 1963. It is therefore clear that in view of the facts of that particular case the conclusion of the learned Single Judge that the sales-tax dues could not be said to have become due and payable within twelve months from the winding-up of the Company was correct and the priority could not be granted to those debts. ( 20 ) WE find in O. J. Appeal No. 2 of 1975 that the sales-tax autho- rities were claiming priority for certain sales-tax dues under the Bombay Sales-Tax Act and certain dues under the Central Sales-tax Act. The relevant date in this particular case is June 26 1967 on which date the order for winding-up the Company was passed. In the light of what we have stated above all sales-tax dues in respect of which the assess- ment orders were passed within the period of twelve months immediately preceding June 26 1967 would have a priority. We find that the amounts of Rs. 3 829 Rs. 2117-43 Rs. 1029-89 Rs. 1237-36 Rs. 367-92 Rs. 741-83 Rs. 1258-83 and Rs. 481-45 will have priority. Similarly all amounts for Central Sales-tax will have priority because the relevant assessment orders were passed and the amounts had become due within the period of twelve months immediately preceding June 26 1967 and the payments aggregating to Rs. 19 812 ps. will rank as ordinary debts without any priority since both the relevant orders were passed after the date of the winding up order. . ( 21 ) WE find that the Sales-tax authorities also seek to recover either as ordinary debts or as priority debts certain amounts of penalties from the Official Liquidator who is the Liquidator of Rajratna Naranbhai Mills Company. Now under the Bombay Sales Tax Act sec. 36 sub-sec. . ( 21 ) WE find that the Sales-tax authorities also seek to recover either as ordinary debts or as priority debts certain amounts of penalties from the Official Liquidator who is the Liquidator of Rajratna Naranbhai Mills Company. Now under the Bombay Sales Tax Act sec. 36 sub-sec. (3) if a dealer does not without reasonable cause pay tax within the time he is required by or under the provisions of the Act to pay it he shall subject to the provisions of sub-sec. (5) of sec. 55 pay by way of penalty in addition to the amount of tax a sum equal to. These amounts of penalty are sought to be imposed upon the Company for the reason that after the order of winding up was passed and when sales-tax dues were demanded from the Liquidator as representing the Company he did not pay any amount. Mr. Shah for the Sales-tax authorities has clearly stated that these are the type of penalties which are sought to be levied from the Company in this particular case. It is obvious that under the scheme of the Indian Companies Act 1956 it is not open to the Liquidator to pay any liabilities whether it is a priority claim or otherwise unless the claims are scrutinised and ascertained and the dues are paid on the orders of the Liquidation Court. Just because the liquidator does not pay promptly within the time mentioned in the notice of demand issued by the sales-tax authorities it cannot be said that he has not paid the tax without reasonable cause. The priority claims have to be ascertained the assets have to be collected and it is only in the course of winding up that even priority claims can be paid. Under these circumstances there was every reasonable cause for the Official Liquidator not to pay the sales tax dues within the time mentioned in the demand notice. We have already referred to the decision of the Supreme Court in Kondaskars case (supra) and pointed out that it is open to the liquidation Court to scrutinise the claim of the revenue after the tax has been determined and its payments demanded from the liquidator. We have already referred to the decision of the Supreme Court in Kondaskars case (supra) and pointed out that it is open to the liquidation Court to scrutinise the claim of the revenue after the tax has been determined and its payments demanded from the liquidator. It is open to the liquidation Court to decide how far under the law the amount of the tax determined by the Department should be accepted as the lawful liability of the Company in liquidation. So far as these penalty amounts are concerned they have been sought to be imposed in total disregard of the consideration of the provisions of the Company Law and without apparently considering whether there was any reasonable cause on the part of the Official Liquidator not to pay the amount within the time prescribed by the sales-tax authorities for the payment of the sales-tax dues Under these circumstances in exercise of powers referred to by the Supreme Court in Kondaskars case (supra) we hold that the amounts of penalties sought to be recovered from the Rajratna Naranbhai Mills Company Limited for non-payment of the sales- tax dues by the Official liquidator are not admissible claims at all because they have been sought to be recovered without application of mind as to whether there was a reasonable cause for the Official Liquidator not to pay that amount. In view of the provisions of the Companies Act he could not have paid that amount as demanded by the sales-tax authorities his hands-being tied by the provisions of the Company Law and yet penalty was sought to be levied from him. Under these circumstances this question of penalty for sales-tax dues must be decided as above and it must he held that the sales-tax officer is not entitled to recover in liquidation proceedings any of these amounts of penalties. ( 22 ) AS regards Company Application No. 26 of 1973 we have already pointed out that the relevant date in this case is August 30 1968 and so far as the income tax dues are concerned some of them are on the basis of pay and some are no the basis of regular pay demands made against the Company. ( 22 ) AS regards Company Application No. 26 of 1973 we have already pointed out that the relevant date in this case is August 30 1968 and so far as the income tax dues are concerned some of them are on the basis of pay and some are no the basis of regular pay demands made against the Company. It is only those amounts which became due and payable in the sense that we have mentioned above and penalty which the Company became liable to pay on account of acts of omission and commission prior to the date of the winding the order that the liability would arise. If the assessment order or the order of penalty was passed within the period of twelve months immediately preceding the relevant date namely August 30 1968 it would be entitled to priority in the light of what we have stated above. ( 23 ) UNDER these circumstances we allow O. J. Appeal No. 2 of 1975 to the extent to which priority can be granted as pointed out above and as regards Company Application No. 26 of 1973 the Liquidator will give priority to the sales-tax dues and income-tax dues in the light of this judgment. There will be no order as to costs in either of these two matters as the provision of law was not clear at the time when the rival contentions were taken up. Company Application No. 26 of 1973 will now go back to the learned Single Judge for being dealt with according to law in the light of what is stated herein. .