R. JAYASIMHA BABU, J.

The question referred in these Tax Cases at the instance of the assessee is:

"Whether on the facts and circumstances of the case there was jurisdiction to assess the company in liquidation for wealth-tax for the assessment years 1984-85 to 1986-87 unless and until the assessing authority established from the books that the assets exceed the liabilities in value"

The assessment years are 1984-85 to 1986-87.

2. The assessee company had been ordered to be wound up by the Court, but the winding-up proceedings were pending during the years of assessment. The company owned a very valuable property at 271, Anna Salai, Madras. It also had properties at Kathirvedu village. The building was valued at Rs.168.76 lakhs and land in the village at Rs.50.02 lakhs. The assessing officer, after rejecting the assessee’s claim that companies in liquidation cannot be assessed for wealth tax, allowed all the liabilities shown in the statement which the assessee had filed along with the return. The amount of liabilities so claimed was Rs.59.55 lakhs.

3. It is evident from the assessment order that tax was levied only on the net wealth, after allowing all the liabilities claimed in the return. The assessment order was taken up in appeal on the ground that the assessing officer had no jurisdiction to assess a company in liquidation to wealth tax. The valuation of the properties also was disputed. The Commissioner, after examining the matter in great detail, reduced the value of the properties and directed that consequential relief be granted to the assessee.

4. On further appeal to the Tribunal, the Tribunal held that companies in liquidation are not exempt from assessment to wealth tax and that the valuation made by the Commissioner did not require any interference.

5. Section 2(h) of the Wealth Tax Act defines a company inter alia as a company formed and registered under the Companies Act, 1956. During the relevant assessment years, wealth tax was chargeable in respect of the net wealth on the corresponding valuation date "of every company, not being a company in which the public are substantially interested..." Neither the definition of "company", nor section 40 of the Finance Act which fastens a liability on the net wealth of companies in which public are not substantially interested to pay wealth tax, stipulates that the company must be a company which is not subject to a winding-up order. Under the provisions of the Companies Act, a company once registered, remains a legal entity until it is dissolved. When a winding-up order is made by the Court in relation to a company or when a company resolves to wind up voluntarily, neither the order directing winding-up, nor the resolution for voluntary winding-up will have the effect of putting an end to the legal entity. It only sets in motion, a series of steps, which, if pursued to the end, will result in the dissolution of the company. Until actual dissolution, the company remains a legal entity.

6. When a winding-up order is made by a Company Court, the affairs of that very company, though now carried on by the Official Liquidator who replaces the Board of Directors and who being an officer of the Central Government, functions subject to the control and supervision of the Company Judge,-- the assets of the company which is ordered to be wound up, does not vest in the Court, but remains the assets of the company itself. Such a company, which is subject to a winding-up order, can also carry on business, if permitted by the Court. The ownership of the assets continue to vest with the company until it is sold or distributed in specie. All companies which are subjected to winding-up orders are not insolvent. Winding-up orders can be made not only on the ground that the company is unable to pay its debts, but also on other grounds set out in Section 433 of the Companies Act. Even in cases where winding-up is directed on the ground that at the time of making the order, the company is unable to pay its debts, it may still be found subsequently that the company has surplus assets after meeting the claims of all its creditors. The distribution of surplus assets among the contributories of a company in liquidation are not unknown.

7. The fact that the Wealth Tax Act does not contain a provision similar to Section 178 of the Income Tax Act would not make any difference to the taxability of the net wealth of a closely held private company which has been subjected to a winding-up order.

8. The assessing officer therefore was competent to make the assessment of the net wealth of a closely held private company, the assessee herein, eventhough that company had been subjected to a winding-up order made by the Company Court.

9. The assessing officer having ascertained all the liabilities set out in the statement filed along with the return, there was no further need for the assessing officer to verify the books of accounts of the company.

The question referred to us is therefore answered in favour of the revenue and against the assessee.