By TIOL News Service

NEW DELHI, MARCH 12, 2019: THE issue before the Apex Court was whether a High Court order dismissing an appeal as being infructuous on grounds of the appellant company being dissolved, is untenable where it omits to examine the application of Chapter XV of the I-T Act & Section 506(5) of the Companies Act, 1956, both of which specify the treatment of discontinued or dissolved companies. YES is the answer.

Facts of the case

THE assessee company had filed an appeal against an order passed by the Tribunal. The High Court noted that in an earlier order, it had directed the assessee's counsel to seek clarification upon the status of the assessee company, inasmuch as whether it was still existent or had become defunct. Thereafter, the assessee's counsel stated that the pursuant to the provisions of Section 560(5) of the Companies Act 1956, the assessee's name had been struck off from the register by the Registrar of Companies. Hence it was claimed that the assessee company had been dissolved. Thereupon, the High Court proceeded to dismiss the appeal as being infructuous. Hence the present appeal by the Revenue.

On appeal, the Apex Court was of the view that,

++ the High Court was wrong in dismissing the appeal as having rendered infructuous. It failed to notice Section 506(5) proviso (a) of the Companies Act & 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". The two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. Both provisions pertain 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;

++ as the High Court did not decide the appeal keeping in view the two relevant provisions, the order is not legally sustainable and has to be set aside. The matter is remanded to the High Court, to be adjudicated within six months' time.

(See 2019-TIOL-114-SC-IT)