the person to whom a notice under this sub-section is
sent fails to make payment in pursuance thereof to the
Income-tax Officer, further proceedings may be taken by and
before the Collector on the footing that the Income-tax
Officer's notice has the same effect as an attachment by the
Collector in exercise of his powers under the proviso to
sub-section (2) of section 46.
Such notices of the Income-tax Officer are no more than a
kind of a garnishee order issued to the person holding money
which money is due to an assessee. The Collector of Customs
had recovered this money and under the decrees of the Court
the Union of India was liable to refund it to the firm. A
garnishee order is issued to a debtor not to pay to his own
creditor but to some third party who has obtained a final
judgment against the creditor. By a parity of reasoning
this amount, which was with the Collector of Customs, could
be asked to be deposited with the Income-tax Authorities
under S. 46(5A). The argument is extremely technical for
that the firm is entitled to get a double benefit of the
decree, first by having the decretal amount paid to the
benefit of the firm and then to recover it again from the
Union of India.
PETITIONER:
COLLECTOR OF CUSTOMS & ORS.
Vs.
RESPONDENT:
M/s. SOORAJMULL NAGARMULL & ANR.
DATE OF JUDGMENT:
28/03/1969
CITATION:
1970 AIR 118 1970 SCR (1) 123
1969 SCC (1) 858
ACT:
Civil Procedure Code, 1908--Order 21 Rule 2, Income Tax Act,
1922, section 46 (5A)-Decree against the Union of India for
refund of excess customs duty collected-Notice issued to
Collector by the Income Tax Officer under section 46(5A) of
Income Tax Act, 1922-Payment by Collector against tax-
Whether amounted to payment by judgment debtor which could
be adjusted under Order 21 Rule 2.
HEADNOTE:
The respondent filed suits against the Collector of Customs
and the Union of India claiming refund of excess customs
duty levied on spindle oil imported into India. The trial
court granted decrees against the Union of India for the
amounts charged in excess. As the respondent had large
outstandings of tax, the Income Tax Officer issued a notice
under section 46(5A) of the Income Tax Act, 1922 calling
upon the Collector of Customs to pay the amount of the
decree to him. The Collector paid the amount into the
Reserve Bank, who issued receipts crediting the amount
against super-tax due from the respondent. He then applied
to the High Court under O. 21 r. 2 C.P.C. for the adjustment
of the decree by this amount. This was refused by a single
Judge as well as in appeal by a division bench. It was held
that the decrees were against the Union of India and not the
Collector of Customs and that payment by the Collector was
not a payment by the judgment debtor. Furthermore the
amounts were held by the Collector on behalf of the Union of
India and not on behalf of the Firm. The High Court also
found the notice to be defective inasmuch as it asked for
payment towards income tax and penalty, while the receipts
which were granted to the Firm stated that the amount paid
was against super-tax due.
On appeal to this Court,
HELD : The Union of India operates through different
Departments and a notice to the Collector of Customs in the
circumstances was a proper notice to issue because it was
the Collector of Customs who had in the first instance
recovered the amount and held it from the respondent.
Collector paid the amount on behalf of the Union of India.
[126 A]
A notice under section 46(5A) is -no more than a kind of
garnishee order issued to the person holding money and the
money is due to an assessee. The amount which was held. by
the Collector of Customs could properly be asked to be
deposited with the income tax authorities under section
46(5A). [127 B-D]
Super tax is also a kind of income tax and therefore, the
notice could issue in the form it did.
There was no force in the contention that the amount, which
could be adjusted under O. 21, r. 2, is a voluntary payment
by the judgment debtor to the decree holder and the present
case was not one of voluntary payment at all. Order No. 21,
r. 2 merely contemplates payment out of court and says
nothing about voluntary payment. A garnishee order can
never by its nature lead to a voluntary payment and it is
not to be thought that a garnishee order does not lead to
the adjustment of the decree
124
sufficient for being certified by the Court. Payment by
virtue of s. 46(5A) is in the nature of a garnishee payment
and must, therefore, be subject to the same rule. [127 G-128
B]
In re Beckitt, [1933].T.R. 1, Bidhoo Beebee v. Keshub
Chunder Baboo & Ors. 9 W.R. 462, Mahiganj Loan Office Ltd.
v. Behari Lal Chaki, I.L.R. [1937] 1 Cal. 781, A. P. Bagchi
v. Mrs. F. Morgan A.I.R. 1935, AU 513, Thomas Skinner v. Ram
Rachpal I.L.R. [1938] All 294, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 429 and 430
of 1966
Appeals by special leave from the judgments and orders dated
January 22, 1964 of the Calcutta High Court in Appeals Nos.
199 and 200 of 1962 from Original Order.
B.Sen and S. P. Nayar, for the appellants (in both the
appeals).
A.N. Sinha -and D. N. Gupta, for respondent No. 1 (in both
the appeals).
The Judgment of the Court was delivered by
Hidayatullah, C.J. This is an appeal against the judgment
and decree of the High Court of Calcutta refusing to enter
satisfaction of two decrees under O. 21 r. 2 of the Code of
Civil Procedure obtained by the respondents against the
Union of India in the following circumstances.
The respondents M/s Soorajmull Nagarmull imported spindle
oil from Philadelphia. The firm was required to pay Customs
Duty under Item 27(3) of the First Schedule to the Tariff
Act, 1934 at 27% ad valorem. The firm filed two suits
asking for refund of excess duty claiming that the oil was
dutiable only under Item 27(8) at -/2/6 per imperial gallon.
The suits were filed against the Collector of Customs, the
Assistant Collector of Customs for Appraisement and the
Union of India. The suits were successful and decrees were
passed against the Union of India for refund of the amount
charged in excess. In one suit the decree was for payment
of Rs. 43,723/- with interest at 6% per annum from 1st day
of April, 1952 until realisation. In the second suit the
decree was for Rs. 75,925/- with similar interest.
Since the firm had not paid a sum of Rs. 18,08,667.72 as tax
the Income-Tax Officer, Circle 11, Calcutta issued a notice
under S. 46(5a) of the Indian Income-Tax Act, 1922 calling
upon the Collector of Customs to pay the amount of the
decree to him and stating that his receipt would constitute
a good and sufficient discharge of the liability for refund
to the firm. The Collector of Customs paid the amount into
the Reserve Bank and the Reserve Bank issued receipts
crediting the amount against Super-
125
tax due from the firm. The Collector of Customs then
applied to the High Court of Calcutta under 0. 21 r. 2 of
the Code of Civil Procedure for the adjustment of the
decrees by this payment. This was refused by a learned
single Judge who gave no reasons while dismissing the
petition. On appeal to the Division Bench it was held by
the Division Bench on January 22, 1964 that the adjustment
of the decrees could not be granted. It is against the last
order that the present appeals have been filed by -,special
leave of this Court.
The High Court in reaching the conclusion observed that the
decrees were against the Union of India and not the
Collector of Customs. Further the sums were held by the
Collector of Customs on behalf of the Union of India and not
on behalf of the firm. The High Court found the notice to
be defective inasmuch as it asked for payment towards
Income-tax and towards penalty, while in the receipts which
were granted to the firm, stated that the amount was for
Super-tax. On these three grounds, the High Court held that
the learned single -Judge was right in dismissing the
application of the Collector of Customs for the adjustment
of the decrees.
Order 2 1, r. 2 of the Code of Civil Procedure takes note of
payments out of court to decree-holders and provides that
where any money payable under a decree of any kind is paid
out of Court, or the decree is otherwise adjusted in whole
or in part to the satisfaction of the decree-holder, the
decree-holder shall certify such payment or adjustment to
the Court whose duty it is to execute the decree, and the
Court shall record the same accordingly. It is also
provided that the judgment-debtor also may inform the Court
of such payment or adjustment, and apply to the Court to
issue a notice to the decree-holder to show cause why such
payment or adjustment should not be recorded as certified.
The contention of the respondents in these appeals is that
the decrees were not passed against the Collector of Customs
but against the Union of India and that payment by the,
Collector of Customs was not a payment by the judgment-
debtor. In our judgment this plea is highly technical. The
amount was recoved by the Collector of Customs from the firm
and was being held by the Union of India through the
Collector of Customs. The Collector of Customs paid the
money not on behalf of himself but on behalf of the Union of
India and it must be treated as a proper payment of the
amount to the firm. The objection of the respondent that it
amounts to a payment by one Department of the Government to
another does not, in our opinion, hold much substance. It
is also extremely technical. The Union of India
126
operates through different Departments and a notice to the
Collector of Customs in the circumstances was a proper
notice to issue because it was the Collector of Customs who
had in the first instance recovered this money and held it
from the firm.
It is next contended that the notice is defective inasmuch
as it shows that the money was lying with the Collector of
Customs whereas it was, in fact, lying with the Union of
India and that it was not money held by the Collector of
Customs on behalf of the firm. Section 46(5A) of the
Income-tax Act reads as follows :
"46. Mode and time of recovery.
(5A) The Income-tax Officer may at any time or from time to
time, by notice in writing (a copy of which shall be
forwarded to the asessee at his last address known to the
Income-tax Officer) require any person from whom money is
due or may become due to the assessee or any person who
holds or may subsequently hold money for or on account of
the assessee to pay to the Income-tax Officer, either
forthwith upon the money becoming due or being held or at or
within the time specified in the notice (riot being before
the money becomes due or is held) so much of the money as is
sufficient to pay the amount due by the tax payer in respect
of arrears of income-tax and penalty or the whole of the
money when it is equall to or less than that amount.
Any person making any payment in compliance with a notice
under this I sub-section shall be deemed to have made the
payment under the authority of the assessee and the receipt
of the income-tax Officer shall constitute a good and
sufficient discharge of the liability of such person to the
assessee to the extent of the amount referred to in the
receipt.
Any person discharging any liability to the assessee after
receipt of the notice referred to in this sub-section shall
be personally liable to the Income-tax Officer to the extent
of the liability discharged or to the extent of the
liability of the assessee for tax and penalties, whichever
is less.
127
If the person to whom a notice under this sub-section is
sent fails to make payment in pursuance thereof to the
Income-tax Officer, further proceedings may be taken by and
before the Collector on the footing that the Income-tax
Officer's notice has the same effect as an attachment by the
Collector in exercise of his powers under the proviso to
sub-section (2) of section 46.
Such notices of the Income-tax Officer are no more than a
kind of a garnishee order issued to the person holding money
which money is due to an assessee. The Collector of Customs
had recovered this money and under the decrees of the Court
the Union of India was liable to refund it to the firm. A
garnishee order is issued to a debtor not to pay to his own
creditor but to some third party who has obtained a final
judgment against the creditor. By a parity of reasoning
this amount, which was with the Collector of Customs, could
be asked to be deposited with the Income-tax Authorities
under S. 46(5A). The argument is extremely technical for
that the firm is entitled to get a double benefit of the
decree, first by having the decretal amount paid to the
benefit of the firm and then to recover it again from the
Union of India.
It is contended lastly that the notice of the Income-tax
Officer spoke of Income-tax and/or penalty whereas the
amount was taken towards payment of Super-tax due from the
firm It is, however, conceded in the face of authorities
cited at the Bar that the Super-tax is also a kind of
Income-tax and, therefore, the notice could issue in the
form it did. The leading case on the subject is In re
Beckitt(1) and learned counsel for the respondents did not
controvert the proposition laid down there. It is, however
argued on the authority of Bidhoo Beebee v. Keshub Chunder
Baboo and Ors., (2) Mahiganj Loan Office, Ltd. v. Behari Lal
Chaki,(3) A. P. Bagchi v. Mrs. F. Morgan(4 ) and Thomas
Skinder v. Ram Rachpal(5), that the payment which can be
adjusted under O. 21, r. 2 is a voluntary payment by the
judgment-debtor to the decree holder and that this iS not a
case of voluntary payment, at, all. The rulings which have
'been cited do not, in our opinion, apply here. This point
was not considered in the High Court and seems to have been
thought of here. Order 21, r. 2 merely contemplates payment
out of court and says nothing about voluntary payment. A
garnishee order can never by its nature
(1) [1933] 1. T. R. 1. (2) 9 W. R. 462.
(3) 1. L. R. [1937] Cal. 781. (4) A. 1. R. 1935 All.
513.
(5) 1. L. R. 1938 All. 294.
128
lead to a voluntary payment and it is not to be thought that
a garnishee, order does not lead to the adjustment of the
decree sufficient for being certified by the Court. Payment
by virtue of S. 46(5A), as we have stated before, is in the
nature of a garnishee payment and must, therefore, be
subject to the same rule.
The rulings themselves do not control the present matter.
In 9 W.R. 462 the payment was not under a garnishee order
but under the process of the court issued in execution by
arrest of the judgment-debtor. Contrasting what had
happened in the case with the words of the second rule of 0.
21 (then s. 206 of the Code of 1859) the learned Judges
observed that s. 206 covers cases of voluntary payment. The
debtor was protected by treating the payment as being made
through the court. The exact point we are dealing with was
not before the Court. In I.L.R. [1937] 1 Cal. 781 there was
a scheme framed by the depositors of a banking Company for
return of their deposits in spite of opposition from decree-
holders depositor of the Company. The scheme was sanctioned
by the Court. The scheme was binding on the decree-holder
but it was not treated as an adjustment within O. 21, r. 2
of the Code of Civil Procedure. The reason given was that
the adjustment must be to the satisfaction of the decree-
holder and must be with the consent of both the decree-
holder and the judgment-debtor and not one which is made
binding by operation of law. It is to be noticed that that
was a payment to which the judgment-debtor had objected
although it was binding on him. We see no reason for making
a distinction between a voluntary payment out of court and a
payment out of court which the law regards as valid. No
-reasons are given in the judgment why such a distinction
should be made. In I.L.R. [1938] An. 294 the payment was
made in court and not outside court. This' is the nearest
case to the present one and but for this difference, it is
reasonable to think that the learned Judges would have taken
the same view of the matter as we have taken. The reason
given by the learned judges brings out the real object of
the rule :
"where a judgment-debtor makes payment outside
the Court, the Court knows nothing about the
payment ' and therefore r. 2, 0.
21 ordains that the parties should inform the
Court about the payment."
This object in our opinion is fully achieved when there is
payment under a garnishee order outside the Court. In the
case cited the Court knew of the payment and could give
protection in other ways. In A.I.R. 1935 All. 513 the
payment was again without the consent of the Judgment-debtor
either in fact or in law. Too much emphasis appears to have
been placed upon mutual understanding and too little on
payment out of court which is the essence
129
of the rule. The case turned on whether there was any
understanding and too little on payment out of court which
is the essence debtor on repairs would be set off against
the decretal amount and therefore O. 21, r. 2 of the Code of
Civil Procedure was held inapplicable.
In none of the cases the point of a garnishee order was
considered. In our opinion, a case of a garnishee payment
or one made under s. 46(5A) of the Income-tax Act of 1922
stands on a different footing and if the payment has been
legally made out of Court in full and final discharge of the
liability under a decree, there is no reason why the
judgment debtor cannot move the Court for getting the
adjustment or payment certified, The payment was required to
be certified under O. 21, r. 2 of the Code of Civil
Procedure and we order that it be so certified.
The appeals are accordingly allowed with costs here and in
the High Court.
R.K.P.S.
Appeals allowed.
Print Page
sent fails to make payment in pursuance thereof to the
Income-tax Officer, further proceedings may be taken by and
before the Collector on the footing that the Income-tax
Officer's notice has the same effect as an attachment by the
Collector in exercise of his powers under the proviso to
sub-section (2) of section 46.
Such notices of the Income-tax Officer are no more than a
kind of a garnishee order issued to the person holding money
which money is due to an assessee. The Collector of Customs
had recovered this money and under the decrees of the Court
the Union of India was liable to refund it to the firm. A
garnishee order is issued to a debtor not to pay to his own
creditor but to some third party who has obtained a final
judgment against the creditor. By a parity of reasoning
this amount, which was with the Collector of Customs, could
be asked to be deposited with the Income-tax Authorities
under S. 46(5A). The argument is extremely technical for
that the firm is entitled to get a double benefit of the
decree, first by having the decretal amount paid to the
benefit of the firm and then to recover it again from the
Union of India.
PETITIONER:
COLLECTOR OF CUSTOMS & ORS.
Vs.
RESPONDENT:
M/s. SOORAJMULL NAGARMULL & ANR.
DATE OF JUDGMENT:
28/03/1969
CITATION:
1970 AIR 118 1970 SCR (1) 123
1969 SCC (1) 858
ACT:
Civil Procedure Code, 1908--Order 21 Rule 2, Income Tax Act,
1922, section 46 (5A)-Decree against the Union of India for
refund of excess customs duty collected-Notice issued to
Collector by the Income Tax Officer under section 46(5A) of
Income Tax Act, 1922-Payment by Collector against tax-
Whether amounted to payment by judgment debtor which could
be adjusted under Order 21 Rule 2.
HEADNOTE:
The respondent filed suits against the Collector of Customs
and the Union of India claiming refund of excess customs
duty levied on spindle oil imported into India. The trial
court granted decrees against the Union of India for the
amounts charged in excess. As the respondent had large
outstandings of tax, the Income Tax Officer issued a notice
under section 46(5A) of the Income Tax Act, 1922 calling
upon the Collector of Customs to pay the amount of the
decree to him. The Collector paid the amount into the
Reserve Bank, who issued receipts crediting the amount
against super-tax due from the respondent. He then applied
to the High Court under O. 21 r. 2 C.P.C. for the adjustment
of the decree by this amount. This was refused by a single
Judge as well as in appeal by a division bench. It was held
that the decrees were against the Union of India and not the
Collector of Customs and that payment by the Collector was
not a payment by the judgment debtor. Furthermore the
amounts were held by the Collector on behalf of the Union of
India and not on behalf of the Firm. The High Court also
found the notice to be defective inasmuch as it asked for
payment towards income tax and penalty, while the receipts
which were granted to the Firm stated that the amount paid
was against super-tax due.
On appeal to this Court,
HELD : The Union of India operates through different
Departments and a notice to the Collector of Customs in the
circumstances was a proper notice to issue because it was
the Collector of Customs who had in the first instance
recovered the amount and held it from the respondent.
Collector paid the amount on behalf of the Union of India.
[126 A]
A notice under section 46(5A) is -no more than a kind of
garnishee order issued to the person holding money and the
money is due to an assessee. The amount which was held. by
the Collector of Customs could properly be asked to be
deposited with the income tax authorities under section
46(5A). [127 B-D]
Super tax is also a kind of income tax and therefore, the
notice could issue in the form it did.
There was no force in the contention that the amount, which
could be adjusted under O. 21, r. 2, is a voluntary payment
by the judgment debtor to the decree holder and the present
case was not one of voluntary payment at all. Order No. 21,
r. 2 merely contemplates payment out of court and says
nothing about voluntary payment. A garnishee order can
never by its nature lead to a voluntary payment and it is
not to be thought that a garnishee order does not lead to
the adjustment of the decree
124
sufficient for being certified by the Court. Payment by
virtue of s. 46(5A) is in the nature of a garnishee payment
and must, therefore, be subject to the same rule. [127 G-128
B]
In re Beckitt, [1933].T.R. 1, Bidhoo Beebee v. Keshub
Chunder Baboo & Ors. 9 W.R. 462, Mahiganj Loan Office Ltd.
v. Behari Lal Chaki, I.L.R. [1937] 1 Cal. 781, A. P. Bagchi
v. Mrs. F. Morgan A.I.R. 1935, AU 513, Thomas Skinner v. Ram
Rachpal I.L.R. [1938] All 294, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 429 and 430
of 1966
Appeals by special leave from the judgments and orders dated
January 22, 1964 of the Calcutta High Court in Appeals Nos.
199 and 200 of 1962 from Original Order.
B.Sen and S. P. Nayar, for the appellants (in both the
appeals).
A.N. Sinha -and D. N. Gupta, for respondent No. 1 (in both
the appeals).
The Judgment of the Court was delivered by
Hidayatullah, C.J. This is an appeal against the judgment
and decree of the High Court of Calcutta refusing to enter
satisfaction of two decrees under O. 21 r. 2 of the Code of
Civil Procedure obtained by the respondents against the
Union of India in the following circumstances.
The respondents M/s Soorajmull Nagarmull imported spindle
oil from Philadelphia. The firm was required to pay Customs
Duty under Item 27(3) of the First Schedule to the Tariff
Act, 1934 at 27% ad valorem. The firm filed two suits
asking for refund of excess duty claiming that the oil was
dutiable only under Item 27(8) at -/2/6 per imperial gallon.
The suits were filed against the Collector of Customs, the
Assistant Collector of Customs for Appraisement and the
Union of India. The suits were successful and decrees were
passed against the Union of India for refund of the amount
charged in excess. In one suit the decree was for payment
of Rs. 43,723/- with interest at 6% per annum from 1st day
of April, 1952 until realisation. In the second suit the
decree was for Rs. 75,925/- with similar interest.
Since the firm had not paid a sum of Rs. 18,08,667.72 as tax
the Income-Tax Officer, Circle 11, Calcutta issued a notice
under S. 46(5a) of the Indian Income-Tax Act, 1922 calling
upon the Collector of Customs to pay the amount of the
decree to him and stating that his receipt would constitute
a good and sufficient discharge of the liability for refund
to the firm. The Collector of Customs paid the amount into
the Reserve Bank and the Reserve Bank issued receipts
crediting the amount against Super-
125
tax due from the firm. The Collector of Customs then
applied to the High Court of Calcutta under 0. 21 r. 2 of
the Code of Civil Procedure for the adjustment of the
decrees by this payment. This was refused by a learned
single Judge who gave no reasons while dismissing the
petition. On appeal to the Division Bench it was held by
the Division Bench on January 22, 1964 that the adjustment
of the decrees could not be granted. It is against the last
order that the present appeals have been filed by -,special
leave of this Court.
The High Court in reaching the conclusion observed that the
decrees were against the Union of India and not the
Collector of Customs. Further the sums were held by the
Collector of Customs on behalf of the Union of India and not
on behalf of the firm. The High Court found the notice to
be defective inasmuch as it asked for payment towards
Income-tax and towards penalty, while in the receipts which
were granted to the firm, stated that the amount was for
Super-tax. On these three grounds, the High Court held that
the learned single -Judge was right in dismissing the
application of the Collector of Customs for the adjustment
of the decrees.
Order 2 1, r. 2 of the Code of Civil Procedure takes note of
payments out of court to decree-holders and provides that
where any money payable under a decree of any kind is paid
out of Court, or the decree is otherwise adjusted in whole
or in part to the satisfaction of the decree-holder, the
decree-holder shall certify such payment or adjustment to
the Court whose duty it is to execute the decree, and the
Court shall record the same accordingly. It is also
provided that the judgment-debtor also may inform the Court
of such payment or adjustment, and apply to the Court to
issue a notice to the decree-holder to show cause why such
payment or adjustment should not be recorded as certified.
The contention of the respondents in these appeals is that
the decrees were not passed against the Collector of Customs
but against the Union of India and that payment by the,
Collector of Customs was not a payment by the judgment-
debtor. In our judgment this plea is highly technical. The
amount was recoved by the Collector of Customs from the firm
and was being held by the Union of India through the
Collector of Customs. The Collector of Customs paid the
money not on behalf of himself but on behalf of the Union of
India and it must be treated as a proper payment of the
amount to the firm. The objection of the respondent that it
amounts to a payment by one Department of the Government to
another does not, in our opinion, hold much substance. It
is also extremely technical. The Union of India
126
operates through different Departments and a notice to the
Collector of Customs in the circumstances was a proper
notice to issue because it was the Collector of Customs who
had in the first instance recovered this money and held it
from the firm.
It is next contended that the notice is defective inasmuch
as it shows that the money was lying with the Collector of
Customs whereas it was, in fact, lying with the Union of
India and that it was not money held by the Collector of
Customs on behalf of the firm. Section 46(5A) of the
Income-tax Act reads as follows :
"46. Mode and time of recovery.
(5A) The Income-tax Officer may at any time or from time to
time, by notice in writing (a copy of which shall be
forwarded to the asessee at his last address known to the
Income-tax Officer) require any person from whom money is
due or may become due to the assessee or any person who
holds or may subsequently hold money for or on account of
the assessee to pay to the Income-tax Officer, either
forthwith upon the money becoming due or being held or at or
within the time specified in the notice (riot being before
the money becomes due or is held) so much of the money as is
sufficient to pay the amount due by the tax payer in respect
of arrears of income-tax and penalty or the whole of the
money when it is equall to or less than that amount.
Any person making any payment in compliance with a notice
under this I sub-section shall be deemed to have made the
payment under the authority of the assessee and the receipt
of the income-tax Officer shall constitute a good and
sufficient discharge of the liability of such person to the
assessee to the extent of the amount referred to in the
receipt.
Any person discharging any liability to the assessee after
receipt of the notice referred to in this sub-section shall
be personally liable to the Income-tax Officer to the extent
of the liability discharged or to the extent of the
liability of the assessee for tax and penalties, whichever
is less.
127
If the person to whom a notice under this sub-section is
sent fails to make payment in pursuance thereof to the
Income-tax Officer, further proceedings may be taken by and
before the Collector on the footing that the Income-tax
Officer's notice has the same effect as an attachment by the
Collector in exercise of his powers under the proviso to
sub-section (2) of section 46.
Such notices of the Income-tax Officer are no more than a
kind of a garnishee order issued to the person holding money
which money is due to an assessee. The Collector of Customs
had recovered this money and under the decrees of the Court
the Union of India was liable to refund it to the firm. A
garnishee order is issued to a debtor not to pay to his own
creditor but to some third party who has obtained a final
judgment against the creditor. By a parity of reasoning
this amount, which was with the Collector of Customs, could
be asked to be deposited with the Income-tax Authorities
under S. 46(5A). The argument is extremely technical for
that the firm is entitled to get a double benefit of the
decree, first by having the decretal amount paid to the
benefit of the firm and then to recover it again from the
Union of India.
It is contended lastly that the notice of the Income-tax
Officer spoke of Income-tax and/or penalty whereas the
amount was taken towards payment of Super-tax due from the
firm It is, however, conceded in the face of authorities
cited at the Bar that the Super-tax is also a kind of
Income-tax and, therefore, the notice could issue in the
form it did. The leading case on the subject is In re
Beckitt(1) and learned counsel for the respondents did not
controvert the proposition laid down there. It is, however
argued on the authority of Bidhoo Beebee v. Keshub Chunder
Baboo and Ors., (2) Mahiganj Loan Office, Ltd. v. Behari Lal
Chaki,(3) A. P. Bagchi v. Mrs. F. Morgan(4 ) and Thomas
Skinder v. Ram Rachpal(5), that the payment which can be
adjusted under O. 21, r. 2 is a voluntary payment by the
judgment-debtor to the decree holder and that this iS not a
case of voluntary payment, at, all. The rulings which have
'been cited do not, in our opinion, apply here. This point
was not considered in the High Court and seems to have been
thought of here. Order 21, r. 2 merely contemplates payment
out of court and says nothing about voluntary payment. A
garnishee order can never by its nature
(1) [1933] 1. T. R. 1. (2) 9 W. R. 462.
(3) 1. L. R. [1937] Cal. 781. (4) A. 1. R. 1935 All.
513.
(5) 1. L. R. 1938 All. 294.
128
lead to a voluntary payment and it is not to be thought that
a garnishee, order does not lead to the adjustment of the
decree sufficient for being certified by the Court. Payment
by virtue of S. 46(5A), as we have stated before, is in the
nature of a garnishee payment and must, therefore, be
subject to the same rule.
The rulings themselves do not control the present matter.
In 9 W.R. 462 the payment was not under a garnishee order
but under the process of the court issued in execution by
arrest of the judgment-debtor. Contrasting what had
happened in the case with the words of the second rule of 0.
21 (then s. 206 of the Code of 1859) the learned Judges
observed that s. 206 covers cases of voluntary payment. The
debtor was protected by treating the payment as being made
through the court. The exact point we are dealing with was
not before the Court. In I.L.R. [1937] 1 Cal. 781 there was
a scheme framed by the depositors of a banking Company for
return of their deposits in spite of opposition from decree-
holders depositor of the Company. The scheme was sanctioned
by the Court. The scheme was binding on the decree-holder
but it was not treated as an adjustment within O. 21, r. 2
of the Code of Civil Procedure. The reason given was that
the adjustment must be to the satisfaction of the decree-
holder and must be with the consent of both the decree-
holder and the judgment-debtor and not one which is made
binding by operation of law. It is to be noticed that that
was a payment to which the judgment-debtor had objected
although it was binding on him. We see no reason for making
a distinction between a voluntary payment out of court and a
payment out of court which the law regards as valid. No
-reasons are given in the judgment why such a distinction
should be made. In I.L.R. [1938] An. 294 the payment was
made in court and not outside court. This' is the nearest
case to the present one and but for this difference, it is
reasonable to think that the learned Judges would have taken
the same view of the matter as we have taken. The reason
given by the learned judges brings out the real object of
the rule :
"where a judgment-debtor makes payment outside
the Court, the Court knows nothing about the
payment ' and therefore r. 2, 0.
21 ordains that the parties should inform the
Court about the payment."
This object in our opinion is fully achieved when there is
payment under a garnishee order outside the Court. In the
case cited the Court knew of the payment and could give
protection in other ways. In A.I.R. 1935 All. 513 the
payment was again without the consent of the Judgment-debtor
either in fact or in law. Too much emphasis appears to have
been placed upon mutual understanding and too little on
payment out of court which is the essence
129
of the rule. The case turned on whether there was any
understanding and too little on payment out of court which
is the essence debtor on repairs would be set off against
the decretal amount and therefore O. 21, r. 2 of the Code of
Civil Procedure was held inapplicable.
In none of the cases the point of a garnishee order was
considered. In our opinion, a case of a garnishee payment
or one made under s. 46(5A) of the Income-tax Act of 1922
stands on a different footing and if the payment has been
legally made out of Court in full and final discharge of the
liability under a decree, there is no reason why the
judgment debtor cannot move the Court for getting the
adjustment or payment certified, The payment was required to
be certified under O. 21, r. 2 of the Code of Civil
Procedure and we order that it be so certified.
The appeals are accordingly allowed with costs here and in
the High Court.
R.K.P.S.
Appeals allowed.
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