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Report No. 60

10.11. Position as to taxes-Supreme Court judgment.-

So far as income-tax arrears are concerned, it has been held by the Supreme Court1 that the Government of India is entitled to claim priority over debts due from the citizen to unsecured creditors. The basic justification for the claim for such priority, according to the Supreme Court, rests on the well-recognised principle that the State is entitled to raise money by taxation, because, unless adequate revenue is received by the State, it would not be able to function as a sovereign Government at all.

1. Para. 10.12, infra.

General Clauses Act, 1897 Back

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