Tax stains are good for Strike Off Companies


Daag Achchhe haiN (Stains are good)” This must be a tagline of a politician or may of a Strike-off company.  Congratulations to all strike-off companies with income tax proceedings. A circular issued by Central Board of Direct Taxes may bring back life to these strike-off companies. It is reported that on or before 4th January 2018, NCLT, vide its interim orders, directs 46 strike –off companies to be deemed to be restored to its original number and entitles petitioner, Income Tax Department to raise demand by serving notice in accordance with law.

Circular No. F.No. 225/423/2017-ITA.II dated 29th December 2017 may help advise Assessing Officers to request revival of a company in the interest of revenue. The circular in its opening paragraph note that such revival request may not be required in all cases.

According to the proviso to Section 248(6), the assets of the (strike – off) company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies. Further subsection 248(7) mandates that the liability of every director, manager or other officers who were exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.

According to Section 250 of the Companies Act, 2013, where a company stands dissolved under section 248, it shall cease to operate as a company except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

However, there are uncertainties regarding proceeding which were already underway under the Income-tax Act, 1961 in case of these strike-off companies.

The Board decided that request or appeal for restoration of the name of the struck off companies with a retrospective date from the date of being ‘struck off’ shall be made by the income-tax department in following situations:

  1. where proceedings under section 143(3)/144/147/153A/153C/set-aside cases were already in progress; or
  2. where proceedings under section 143(3}/144/147/153A/153C are contemplated in near future; or
  3. where Departmental Appeals were pending; or
  4. where Penalty proceedings already initiated were pending; or
  5. where Prosecution proceedings were initiated /launched.

CBDT directed that it should be duly emphasized that:

  1. The restoration is being requested to protect the legitimate interests of revenue;
  2. the concerned company had apparently committed serious violations of provisions of Income-tax;
  3. the restoration of the company in the register of companies would enable the Income-tax Department to take the pending proceedings to a logical conclusion; and
  4. the request revival of the ‘struck off’ company from the date of ‘strike off’.

Assessing Officers on a case by case basis shall immediately make a reference to the respective regional RoCs for the revival of ‘stuck off’ companies.

Alternatively, Income-tax authorities shall file an appeal before the NCLT for the revival of struck off companies. As mentioned above, it is reported that on or before 4th January 2018, NCLT, vide its interim orders, directs 46 strikes off companies to be deemed to be restored to its original number and entitles petitioner, Income Tax Department to raise demand by serving notice in accordance with law.

Now, the taxation authorities shall look into the option to recover income tax dues from other strikes off companies against whom it needs to initiate tax recovery but not yet initiated.

In simple words, strike off companies has a ray of hope for restoration after much talk about the surgical strike against shell companies. No doubt, this may affect the anti-corruption image of present government in power.

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