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TMI Blog1981 (10) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... tered under the provisions of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi (for short called the local Act), and the Delhi Sales Tax Rules, 1951 (for short called the Rules), as well as under the Central Sales Tax Act, 1956 (for short called the Central Act), and the Central Sales Tax (Registration and Turnover) Rules, 1957. Local sales tax registration certificate bearing No. 27493 dated 30th March, 1962, and Central sales tax registration certificate bearing No. 15730 dated 30th March, 1962, were issued. The partnership business continued up to 25th January, 1965, when a deed of dissolution was executed between the said parties, and T. L. Tandon agreed to continue the business under the same name and style of the firm on taking over the entire assets and liabilities. Subsequently, on 25th January, 1965, another partnership deed was executed amongst T. L. Tandon, Raj Kishan Goyal, Raj Kumar Jain and Pawan Kumar, which, inter alia, provided that the partnership concern being constituted under the deed of partnership was to take over all the assets and liabilities of M/s. Hari Trading Corporation as embodied in the balance sheet drawn for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maining assessments were allowed to be made under the orders of the court during the pendency of the petitions but a restraint was placed that no demands be made against the dissolved firm. The copies of the assessment orders passed during the pendency of the petitions were placed on the record. The main contention before the learned single judge was that neither under the local Act nor under the Central Act there is any statutory provision permitting the assessment of a dissolved firm in respect of its pre-dissolution turnover. Reliance was placed for the submission on the law laid down by the Supreme Court in State of Punjab v. Jullundur Syndicate [1966] 17 STC 326 (SC); AIR 1966 SC 1295, a case arising out of the provisions of the East Punjab General Sales Tax Act, 1948, and its Rules. After comparing the provisions of the local Act and the Rules with the Punjab Act and the Rules and finding them in Pari material the learned single judge accepted the petition and quashed the assessments made after the dissolution of the firm by the assessing authorities. This appeal and the connected appeal under clause X of the Letters Patent have been filed by the Commissioner of Sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of this definition contained in the General Clauses Act, 1897. By the charging section 4 every dealer whose turnover during the year immediately preceding the commencement of the local Act exceeded the taxable quantum is liable to pay tax under the local Act on all sales effected after the date so notified. Because of section 7, no dealer can, while being liable to pay tax under section 4, carry on business as a dealer unless he has been registered and possesses a registration certificate. The firm was treated by the authorities under the local Act as included in the definition of a dealer and was for this reason granted the registration certificate. That is the requirement of section 7(3), which says that if the authority is satisfied that an application for registation is in order, he shall, in accordance with such rules as may be prescribed register the applicant and grant him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of section 5. The firm was granted on application registration certificate No. 27493 dated 30th March, 1962. The assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond the specific power conferred so as to confer power of assessment of a dissolved firm in respect of its pre-dissolution turnover unless the statute under which the assessment is made authorises the assessment either expressly or by implication. The rules made in the exercise of delegated authority are valid and binding only if made within the limits of the power conferred. The authority to assess a dissolved firm has, therefore, to be found out in the enactment itself and not in the Rules. We are unable to agree with the submissions of the learned counsel for the revenue that rule 39(l) or rule 39(1A) impliedly envisages the assessment of a dissolved firm. It does not constitute or set up any machinery or mechanics of framing an assessment against a dissolved firm. It does not enable the assessment of a dissolved firm. It only speaks of the liability of the partners of the firm to pay the tax so assessed on the firm before its dissolution and continues that liability even after dissolution. The question of statutory power of assessing a dissolved firm is to be contrasted and not mixed up with the liability of the partners. Rule 39(l) and (1A) only ensures the payment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only a compendious name for the partners for the time being. Under the law the firm as such is not a juristic entity. For tax law, income-tax as well as sales tax, however, it is a legal entity. On dissolution the firm ceases to be a legal entity, and unless there is a statutory provision permitting the assessment of a dissolved firm, assessment proceedings cannot be maintained against a firm, which ceases to have legal existence. A Hindu undivided family is neither a person nor an association of persons, but it is a separate entity by itself for the purposes of assessment under the Income-tax Act, 1922, as is clear from section 3 of that Act. The partition of the Hindu undivided family has the effect of disruption of the status and discontinuance of the business. The liability in case of discontinuance was continued by force of section 44 of the Income-tax Act, 1922. However, the power of assessment after partition of Hindu undivided family was not there in the original Act but was inserted by section 4 of the Income-tax (Amendment) Act, 1928, as section 25A. Similarly, section 24B of the Income-tax Act, 1922, added by the Income-tax (Second Amendment) Act, 1933, extended fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment of a dissolved firm. These are the principles enunciated by the Supreme Court in Jullundur's case [1966] 17 STC 326 (SC); AIR 1966 SC 1295, followed by the Supreme Court in Khushi Ram Behari Lal Co. v. Assessing Authority, Sangrur [1977] 19 STC 381 (SC) and Additional Tahsildar, Raipur v. Gendalal [1968] 21 STC 263 (SC) and extracted by Chandrachud, J. (as he then was and who spoke for the majority), in Murarilal's case [1976] 37 STC 77 (SC): "The Jullundur Vegetables Syndicate case [1966] 17 STC 326 (SC); AIR 1966 SC 1295 is a clear and direct authority for the following propositions: (1) A dissolved firm cannot be assessed to sales tax unless the statute under which the assessment is made authorises the assessment either expressly or by necessary implication; (2) If, by definition, a firm is a dealer under an Act, it becomes a legal entity or an independent assessable unit for the purposes of that Act. If that be so, the firm ceases to be a legal entity on dissolution and, thereafter, on principle it cannot be assessed to sales tax unless the statute so authorises expressly or by necessary implication; (3) Neither a provision requiring a dealer to inform the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of the local Act and the Rules is one which is created by the charging section 4(l) and since the prescribed taxable quantum existed, the liability under section 4(2) was attracted. Such liability, according to the counsel, is ipso juro ex hypothesi fixed or determined and, therefore, independent of any order of assessment. Section 4(l) is the charging section and extends the liability to pay tax on all sales effected after the notified date. Section 4(3) says that every dealer who has become liable to pay tax under the local Act shall continue to be so liable until the expiry of three consecutive years, during each of which his gross turnover has failed to exceed the taxable quantum and such further period after the date of such expiry as may be prescribed, and on the expiry of this latter period his liability to pay tax shall cease. The argument is that the combined effect of the provisions of sections 4(3) and 7(6), read with rules 10 and 12(1)(d) is that the registered dealer who becomes liable to pay tax continues to be so liable until cancellation of his registration and it is only on cancellation that the liability to pay the tax ceases. It is submitted that the dissolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or an implicit power of an assessment or reassessment of a dissolved firm. We are unable to read in section 11 or 11A that the legislature had addressed its mind to the assessment or reassessment of a dissolved firm and collection of the tax from it when enacting those provisions. There is no implication in the provisions of section 11 or 11A that it provides for any power or procedure for assessing a dissolved firm for its pre-dissolution turnover. There is no indication of the legislatures' intendment that the dissolved firm by any deeming provision or statutory fiction continued to exist for the purposes of assessment. To us it is clear that there was a lacuna in the local Act and it was filled by the insertion of section 12F. Similar is the view of Avadh Bahari, J., in Janki Devi v. Sales Tax Officer [1977] 39 STC 268 expressed in his own typical way. We agree. The counsel for the revenue then, basing himself on the last decision of the Supreme Court, attempted to compare the provisions of section 5 read with section 11(6) of the Bombay Sales Tax Act, 1953, with those contained in section 4(3) read with section 7(6) of the local Act as also the provisions of sections 15(l) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as of the local Act and the Rules for comparison: East Punjab Act Local Act "Section 2. (d) 'Dealer' means any Section 2. (c) 'Dealer' means any person, firm or Hindu joint family, person who carries on the business of engaged in the business of selling or selling goods in the Union Territory supplying goods in East Punjab; ... of Delhi and includes the Government (It should be read with section 3(42) of the General Clauses Act, 1897, and East Punjab Act Local Act thus would include a firm which is a body of individuals.) Section 4. (1) Subject to the proviSection 4. With effect from such sions of sections 5 and 6, every dealer date as the Chief Commissioner may, whose gross turnover during the year by notification in the official Gazette, immediately preceding the commenceappoint, being not earlier than thirty ment of this Act exceeded the taxable days after the date of the said notificaquantum shall be liable to pay tax tion, every dealer whose gross turnunder this Act on all sales effected after over during the year immediately the coming into force of this Act. preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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