1983 (3) TMI 15 - HC - Income Tax

Summary

Issues: Dispute over the distribution of a sum of Rs. 12,341 between the Income Tax Department and Dey's Medical Stores Private Ltd. based on the interests of the partners of a dissolved partnership firm.

Analysis:
The judgment revolves around the dispute regarding the distribution of a sum of Rs. 12,341 between the Income Tax Department and Dey's Medical Stores Private Ltd. concerning the interests of the partners of a dissolved partnership firm. The firm, S. S. Dhanyakumar Dharamdas & Co., had obtained a money decree against Baijnath Choudha, and a settlement was reached with the decree adjusted. Dey's Medical Stores objected to this settlement, leading to a legal battle. The contention arose as to whether the assets of the partnership, including the amount realized towards the decree against Choudha, could be attached by the Income Tax Department for recovering dues against Dharamdas. The court found that Dharamdas' share in the assets was sold and purchased by the other partners, Dhanyakumar and Abhaykumar, thereby excluding Dharamdas from any interest in the decretal amount. Consequently, no dues against Dhanyakumar could be recovered from this amount.

The judgment further delves into the attachment order issued by the Tax Recovery Officer, which sought recovery from four individuals, including Dhanyakumar and Abhaykumar. It was established that only Dhanyakumar and Abhaykumar had a share in the attached amount of Rs. 12,341. The court determined that the Income Tax Department could recover Rs. 425 from Dhanyakumar's half share and the entire share of Rs. 6,170.50 from Abhaykumar. This decision was based on the fact that the recovery was against the individuals and not the firm, thereby limiting the department's entitlement to specific amounts from each partner's share.

Regarding the priority of dues, the court dismissed the arguments presented by Dey's Medical Stores, emphasizing that the Income Tax Department held priority over private debts. The court highlighted that a recovery certificate issued by the Department was sufficient to establish the amount due, and the executing court could not question the validity of the tax claim. Referring to relevant legal provisions and precedents, the court concluded that the Income Tax Department was entitled to Rs. 6,595.50 from the total sum of Rs. 12,341, with the remaining amount available for distribution among other creditors in accordance with Section 73 of the Civil Procedure Code. As a result, both revisions partly succeeded, with no order as to costs.