1982 (4) TMI 147 - AT - Income Tax

Summary

Issues:
1. Whether the assessee is liable to pay firm's tax in respect of share income from a larger firm, which has already paid tax.
2. Whether the concept of sub-partnership affects the liability of the assessee to pay firm's tax.
3. Whether the statutory provisions provide relief against double taxation in such cases.

Analysis:
1. The appeal pertains to the assessment year 1978-79, involving the liability of the assessee, a registered firm, to pay firm's tax on share income from a larger firm. The assessee contended that since the larger firm had already paid tax on the income, imposing tax on the share income would result in double taxation. However, the Income Tax Officer (ITO) rejected this plea, emphasizing that registered firms are subject to tax at concessional rates. The Assessing Officer further stated that the plea of the assessee for non-liability to tax cannot be accepted due to the concessional tax rates applicable to the assessee-firm.

2. The assessee appealed to the Appellate Assistant Commissioner (AAC), who referred to a precedent and held that if double taxation arises due to statutory provisions, it is not unconstitutional. The AAC noted that in the present case, there was no instance of double taxation on the same income. The assessee's counsel relied on the concept of sub-partnership, arguing that the sub-partnership is part of the larger partnership entity, and when the larger partnership paid tax, the sub-partnership should not be liable to pay tax on the same income.

3. The Tribunal considered the arguments presented and analyzed the statutory provisions under section 67(1)(a) of the Income-tax Act, 1961. The Tribunal observed that the legislature had provided relief against double taxation by allowing for deduction of firm's tax before apportioning the share income. The Tribunal emphasized that the assessee, being a separate registered firm, is assessable independently, and the statutory provisions mandate tax levy on the total income of the registered firm. The Tribunal concluded that no double taxation occurred as the share income was apportioned after deduction of firm's tax, as provided by the statute.

4. The Tribunal dismissed the appeal, stating that no double taxation existed since the same income was not taxed twice on the same assessee. The Tribunal upheld the assessment, noting that the relief against double taxation, as envisaged by the legislature, was already granted in the computation of the apportioned income. The decision was based on the conformity with relevant statutory provisions and the mandatory nature of tax levy on the total income of the registered firm, as specified in the Finance Act.