1969 (12) TMI 11 - HC - Income Tax

Prayer for the issue of a writ of mandamus or a direction in the nature of a writ of mandamus directing the Income-tax Officer to issue a tax clearance certificate under section 230(1) of the Income-tax Act, 1961.

Summary

Issues:
1. Entitlement to tax clearance certificate under section 230(1) of the Income-tax Act, 1961.
2. Liability of legal representative for tax assessed on a dissolved firm.
3. Interpretation of section 44 of the Income-tax Act prior to its amendment in 1958.
4. Application of the decision in Manindra Lal Goswami v. Income-tax Officer to the case at hand.
5. Validity of the refusal to grant the tax clearance certificate to the petitioner.

Analysis:
The petitioner, a widow seeking a tax clearance certificate to move to New Zealand, was denied by the Income-tax Officer due to alleged tax liability of Rs. 48,715 from her deceased husband's partnership in the dissolved firm "Inka Corporation." The respondent contended that as the heir, the petitioner is liable for the tax. However, the petitioner argued that the firm dissolved in 1953, and under section 44 of the Act pre-amendment, partners should be assessed jointly or severally. The court noted that the assessment orders were served only on one partner, not the petitioner's husband, making him not liable. The court cited Manindra Lal Goswami case stating that after firm discontinuance, partners are individually liable. The court agreed that partners should be assessed post-dissolution, not the firm, and as no tax liability was fixed on the petitioner's husband, the petitioner is not liable either. Hence, the refusal to grant the tax clearance certificate was deemed unjustified.

The court emphasized that under section 29 of the Act, partners of a dissolved firm are liable for tax dues, and in this case, the petitioner's husband was not assessed or served a notice of demand. Consequently, the petitioner, as the heir, is not responsible for the tax assessed on the dissolved firm. The court allowed the writ petition, directing the respondent to issue the tax clearance certificate promptly, considering the petitioner's impending migration deadline. The court highlighted that the petitioner must receive the certificate within three weeks and made no order as to costs. The judgment clarified the legal position regarding tax liability in cases of dissolved firms and upheld the petitioner's right to the tax clearance certificate for her relocation purposes.

In conclusion, the court's decision favored the petitioner, ruling that she was not liable for the tax assessed on the dissolved firm "Inka Corporation." The judgment highlighted the correct interpretation of the law pre-amendment and post-dissolution of a firm, emphasizing the individual liability of partners. The court's directive for the immediate issuance of the tax clearance certificate underscored the urgency of the petitioner's situation, ensuring her timely relocation plans to New Zealand.