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Income Tax procedure for COmpany winding up

SAMIT CHONKAR (Service) (45 Points)

25 February 2010

Dear Friends,

Can anyone guide me that what will be the procedure as far as income tax is concerned if we want to liquidate a Limited Company? What forms, returns need to be filled?

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2 Replies

Amir (Learner) (4016 Points)
Replied 25 February 2010

Dear Samit,

Sec 178 is self explanatory

178. (1) Every person—

(a) who is the liquidator of any company which is being wound up, whether under the orders of a court or otherwise ; or

(b) who has been appointed the receiver of any assets of a company,

(hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the ¹⁴[Assessing] Officer who is entitled to assess the income of the company.

(2) The ¹⁴[Assessing] Officer shall, after making such inquiries 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 ¹⁵[Assessing] Officer, would be sufficient to provide for any tax which is then, or is likely thereafter to become, payable by the company.

¹⁶[(3) The liquidator—

(a) shall not, without the leave of the ¹⁷[Chief Commissioner or Commissioner], part with any of the assets of the company or the properties in his hands until he has been notified by the ¹⁸[Assessing] Officer under sub-section (2) ; and

(b) 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 :

Provided that nothing contained in this sub-section shall debar the liquidator from parting with such assets or properties for the purpose of the payment of the tax payable by the company or for making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to Government on the date of liquidation or for meeting such costs and expenses of the winding up of the company as are in the opinion of the ¹⁹[Chief Commissioner or Commissioner] reasonable.

(4) If the liquidator fails to give the notice in accordance with sub-section (1) or fails to set aside the amount as required by sub-section (3) or parts with any of the assets of the company or the properties in his hands in contravention of the provisions of that sub-section, he shall be personally liable for the payment of the tax which the company would be liable to pay :

Provided that if the amount of any tax payable by the company is notified under sub-section (2), the personal liability of the liquidator under this sub-section shall be to the extent of such amount.]

(5) Where there are more liquidators than one, the obligations and liabilities attached to the liquidator under this section shall attach to all the liquidators jointly and severally.

(6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force.

However if it happens to be a Private Company then Sec 179 may have some role to play -

Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), ²²[where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company] cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.