9911796707
TMI Blog2008 (1) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... du Entertainments Tax Act, 1939 and as on today the following persons are the partners in the petitioner-firm : (a)Sri Kathirvel (b)Smt. K. Neethimallika (c)K.K. Ambalayanan (d)Sri K. Balamuruganandam (e)Smt. K.B. Malini (f)Sri B. Karthikeyan (g)K. Vetrivel Kannan (h)Sri Vanan V. Kannan 3. According to the petitioner, the petitioner is not having any arrears of entertainment tax. While so, a demand notice in Form No. 4, dated 9-10-2007, was issued prior to the attachment of a property for arrears of sales tax and the said notice was addressed to the following three partners of the petitioner-firm : (a)Sri Kathirvel (b)Sri K. Balamuruganandam (c)Sri K. Vetrivel Kannan calling upon them to pay a sum of Rs. 61,16,921 within 15 days from the date of receipt of the same failing which they were informed that the property in T.S. No. 31/6A, Arappalayam village, Madurai South taluk, will be attached. Challenging the said demand notice the petitioners have filed W.P. No. 8976 of 2007. In the said writ petition notice alone was ordered and no interim orders were granted in favour of the petitioner. While the said writ petition is pending a notice of attachment in Form No. 5 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner to run the theatre under TNET Act. 8. According to the respondent, the said document is a manipulated one to suit their convenience and to escape from sales tax arrears relating to other firms in which the above partners are also partners. In the counter-affidavit the details of the constitution of 1. M/s. Sri Mappillai Vinayagar Spinning Mills Ltd., 2. M/s. Sri Manicka Vinayagar Spinning Mills Ltd., 3. M/s. Sri Mappillai Vinayagar Roller Flour Mills (partnership firm), 4. M/s. Sri Mappillai Vinayagar Cine Complex (theatre) and 5. M/s. Sri Manicka Vinayagar (theatre) have been furnished. Though M/s. Sri Mappillai Vinayagar Spinning Mills Ltd., and M/s. Sri Manicka Vinayagar Spinning Mills Ltd., are limited companies, the directors in the said companies are one and the same and they are also the partners in M/s. Sri Mappillai Vinayagar Cine Complex and therefore, the arrears of tax due from the limited companies and the firm are equally liable to be recovered from the properties owned by the same partners in M/s. Sri Mappillai Vinayagar Cine Complex. 9. It is the contention of the respondent that the petitioner-firm has been brought into existence with an intention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure so provides but in certain exceptional cases, which would embrace those cases where the corporate entity is used for tax evasion or to circumvent tax obligation, the court is entitled to lift the corporate veil and to pay regard to the economic realities behind the legal facade. If the situation so demands and for the ends of justice the corporate personality itself may be disregarded. It is thus, well-settled that the corporate veil can be cracked open even in the absence of a statutory provision, when it is felt that the corporate entity is being used as a device or cloak to circumvent tax obligations or as an instrument of fraud." (p. 445) 16. The learned Government advocate further submitted that under rule 40 of the TNGST Rules, the partners of the petitioner-firm being directors in the two private limited companies and partners in the other assessee-firm are liable for the sales tax arrears of the two private limited companies and the firm jointly and severally. 17. I have carefully considered the said submissions made on either side. 18. The issue that arises for consideration in the above writ petition, viz., whether the properties of the partners of the petitioner-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of any particular share in any particular asset, movable or immovable, and that it is only after a dissolution and settlement of accounts he may become the owner of any item of partnership property depending upon the terms of dissolution and settlement. Until dissolution a member of the partnership cannot claim a right to separate enjoyment and possession of any asset of the firm; nor can he exclude or prevent the firm or the partners of the firm from enjoying and being in possession of the property on behalf of the firm. According to learned counsel the result, therefore, is that no person, whether State or any creditor, to whom moneys are due from an individual partner of a firm can, under the guise of recovering such moneys, take physical possession by seizure, thus excluding and preventing the partners of the firm from using and being in enjoyment and possession of the assets of the firm. Learned counsel contends that the State may have a right to obtain a garnishee order or file a suit for dissolution and for taking of accounts for the purpose of working out the rights of the dealer with a view to obtain satisfaction of the claim out of any assets that may be allotted or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -9-1994, in W. P. Nos. 9380 to 9382 of 1987 is set aside. The above writ petitions are disposed of in the following terms. (6) The first respondent is directed not to issue any direction to the bank in respect of three partnership concerns in question beyond the interest held by Nelliappan without affecting the interests of other partners, for the recovery of sales tax arrears of Rs. 5,35,621 due from M/s. Vigneswara and Venkateswara Corporation." (p. 76) 24. Thus, it is clear that while the revenue is entitled to proceed against the shares of the common partners in the petitioner's partnership firm towards the sales tax arrears of the assessee-firm the revenue cannot attach the shares of the remaining partners who are not partners of the assessee-firm. 25. Therefore, the impugned proceedings which seek to attach the entire properties of the petitioner-firm including the shares of the partners, who are admittedly not the partners of the assessee-firm, viz., M/s. Sri Mappillai Vinayagar Roller Flour Mills firm is bad in law and hence so far as such partners are concerned the impugned attachment order cannot be sustained land accordingly set aside. Similarly, in view of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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