HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Union of India and Another v. India Fisheries (P) Ltd.
Civil Appeal No. 211 of 1964
[1965] 3 SCR 679 ·
Indian Income-tax Act, 1922: sections 48 and 49E · Indian Companies Act, 1913: sections 179, 180, 228 and 229 · Constitution of India: Articles 133(1)(c) and 226
Sources & disclosures includedDownload original judgment / order
3-judge bench · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1948-49, 1955-56
01 · Facts of the case
India Fisheries was ordered wound up on 11 October 1950. Revenue assessed Rs.8,737-15-0 for AY 1948-49, proved that demand as an ordinary liquidation claim and received Rs.5,188-3-0 in a 9.5-anna dividend, leaving Rs.3,549-12-0. For AY 1955-56 the liquidator paid Rs.2,565-6-0 advance tax, while regular assessment fixed only Rs.1,126-12-0. A Rs.1,460-1-0 refund including interest therefore arose. Instead of paying it to the liquidator, the officer invoked section 49E to set it against the earlier balance. The Commissioner affirmed; the Bombay High Court set the adjustment aside and directed treatment of the refund under section 48. The Union appealed.
Source: Liquidation claim, refund and writ facts: SCR pp.680-681 / PDF pp.2-3
02 · Discussion by the Hon’ble Court
Section 49E generally empowered the income-tax authorities to set a refund against tax, interest or penalty remaining payable. But sections 228 and 229 of the 1913 Companies Act required claims against an insolvent company to be proved and unsecured creditors to share pari passu. Revenue conceded that its claim had no priority. Once it proved the debt in liquidation, it could not use section 49E to obtain a priority that would defeat the liquidation scheme. The apparent conflict was reconciled by treating section 49E as the general provision and the liquidation debt-and-payment rules as the special provisions: section 49E applied where insolvency rules did not. On that construction, the officer lacked authority to make this set-off, and the High Court properly exercised Article 226 jurisdiction.
Source: Statutory reconciliation and pari passu reasoning: SCR pp.681-683 / PDF pp.3-5
03 · Judicial decision
The Supreme Court agreed with the High Court that the Income-tax Officer erred in applying section 49E and that the Commissioner erred in affirming him. It dismissed the Union's appeal with costs.
04 · Outcome / in whose favour
In favour of the company in liquidation and the pari passu position of unsecured creditors. Revenue remained entitled to its proved ordinary claim but could not improve that position by diverting the separate refund through section 49E.
Source: Priority limit and outcome: SCR pp.682-683 / PDF pp.4-5
05 · AKHB REVIEW POINT
AKHB analysis: before adjusting a tax refund against an insolvent company's old demand, identify whether the claim has been admitted in the collective process, its statutory priority and whether set-off would circumvent equal distribution. Keep tax quantification distinct from recovery against assets controlled by the insolvency forum, and apply the current tax, company and insolvency provisions rather than assuming the 1922/1913 result remains unchanged.
Source: AKHB analysis based on the liquidation-priority reasoning
Source & verification
Download original judgment / order · Open cited source rendition
Full 5-page SCR report read; the editorial headnote on PDF pages 1-2 was distinguished from Sikri J.'s judicial opinion beginning on PDF page 2 and continuing through page 5.
- Exact 183,233-byte source, SHA-256 and 5-page count match catalogue asset 1965_3_679_683.
- The report verifies Civil Appeal No. 211 of 1964, decision date 9 April 1965, the three-judge bench and opinion by S. M. Sikri J.
- The source distinguishes the 1948-49 ordinary tax claim from the 1955-56 excess advance-tax refund.
Statutory scope
The decision construes section 49E of the Income-tax Act, 1922 with sections 228-229 of the Companies Act, 1913. Current refund adjustment, insolvency waterfall and corporate-liquidation treatment require independent analysis under the presently applicable tax and insolvency statutes.
Later treatment
Source checked 2026-10-10. Comprehensive later treatment, present insolvency legislation and current refund-adjustment rules have not been verified; no current-law or citator clearance is represented.
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