1978 (3) TMI 5 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of invoking provisions of s. 182(4) for recovering tax due by deceased partner.
2. Applicability of s. 182(4) after dissolution of firm.
3. Interpretation of liability under s. 182(4) for firm regarding partner's tax.

Analysis:
The judgment involved a dispute where the petitioner, a partner in a dissolved firm, challenged a notice demanding payment under s. 182(4) of the Income Tax Act. The petitioner contended that the demand was not valid due to the dissolution of the firm and questioned the jurisdiction of the tax authorities to recover the tax from him. The petitioner also argued that the liability under s. 182(4) should be restricted to 30% of the deceased partner's share income. The court examined the provisions of s. 182(4) which allow a firm to retain a portion of partner's income until tax is paid, making the firm liable if the partner defaults. The court emphasized that the liability of the firm cannot exceed 30% of the partner's share income.

Regarding the applicability of s. 182(4) post firm dissolution, the court referred to the provisions of s. 189(3) which allow enforcement of demands even after dissolution. The court cited a previous case to support the view that the liability under s. 182(4) is a joint and several liability of partners, even after dissolution. The court analyzed the firm's payments towards the deceased partner's tax liability and concluded that the firm's liability under s. 182(4) was limited to 30% of the partner's share income. The court rejected the revenue's argument that payments made by the firm before invoking s. 182(4) should not be considered for determining the firm's liability.

In the final analysis, the court quashed the order demanding payment of the remaining balance, stating that the firm's payments towards the deceased partner's tax exceeded the 30% liability under s. 182(4. The court clarified that annuity deposit payments by the firm did not discharge the income tax liability under s. 182(4. The court allowed the writ petition, directing the tax authorities to issue a fresh demand for the remaining balance owed by the firm. The judgment highlighted the statutory limits on firm liability under s. 182(4) and emphasized the joint and several liability of partners even after firm dissolution.