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TMI Blog1991 (3) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the intimation of their retirement by the Commissioner of Sales Tax in terms of section 25 of the Gujarat Sales Tax Act, 1969, as construed by the Tribunal?" 2.. It is necessary to refer to the facts to answer the said questions: (i) The applicants and two other partners commenced business of fabrication and manufacture of goods in the name and style of M/s. Jalaram Engineering Works at Vadodara on and from December 11, 1972. The firm was duly registered as a dealer under the Gujarat Sales Tax Act, 1969. Thereafter, by agreement, dated 29th December, 1973, two out of four partners, namely, the present applicants retired as partners of the said firm with effect from 26th November, 1973, and the remaining two partners, namely, (i) Shantilal Ratilal Raberu and (ii) Rameshchandra Harakji Chandrani continued the business of the said firm having acquired the assets, rights and liabilities of that firm from the said date. It is required to be noted that the applicants after retiring as partners did not intimate the date of their retirement to the Commissioner by notice in that behalf in writing. Such intimation was required to be given within 15 days from the date of retir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure question of law, and that it was required to be referred for our opinion. The Tribunal, therefore, formulated the two questions of law stated hereinabove for our opinion. 3.. In order to answer the first question of law, it is necessary to refer to the terms and conditions of deed, dated 29th December, 1973. The said deed is captioned as "deed of dissolution" of M/s. Jalaram Engineering Works. Thereafter, it is recited in the preface of the said deed that the said partnership firm was carrying on its business in the name and style of M/s. Jalaram Engineering Works since 11th December, 1972. From the said partnership firm two partners, namely, (i) Smt. Muktaben Jayantilal and (ii) Smt. Ramaben Kantilal Vithalani (present applicants) have retired voluntarily since they have expressed their desire to retire on 26th November, 1973 and the remaining two partners have consented to their retirement from the partnership firm. It is further stated that in view of the said development the said two partners (applicants) have retired from the partnership firm with effect from 26th November, 1973 and the document of their retirement is being executed on 29th December, 1973, on the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that the applicants who are partners had retired from the said partnership firm permitting remaining two partners to continue same business as partners of the partnership firm in the same name and style. The said deed, is not a deed of dissolution though it is captioned as "dissolution deed", but it is a "deed of retirement of two partners". The partnership firm as such does not come to an end nor does it stand dissolved. We, therefore, find that on construction of the deed, dated 29th December, 1973, the Tribunal was right in law in holding that it was merely a deed of retirement of two partners (applicants) and it was not a deed of dissolution of M/s. Jalaram Engineering Works. 5.. The second question relates to interpretation of condition No. 4 of the said deed, dated 29th December, 1973. As stated hereinabove, by condition No. 4, it is inter alia, stipulated that continuing partners have taken over the rights and liabilities including liability to pay all taxes except income-tax, and therefore, the retiring partners are not required to discharge any liability. Based on this stipulation in the deed, it was contended before the Tribunal that there was no liability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocate for applicant submits that on retirement of the applicants from the partnership firm, a new separate firm comes into existence and reference to the firm in the main part of this section is to a "firm" which is liable as a dealer under the Act, and therefore, those partners who continue the business are liable to tax and not the retiring partners. He further submits that for the purpose of sales tax alone a partnership firm is described as separate exigible entity, and therefore, a firm which continued the business after retirement of two applicants could be treated as separate and distinct entity. In his submission the continuing firm which continued business with two partners after 26th November, 1973, being separate exigible entity it was liable to pay tax. We are afraid we cannot accept such contention in view of specific provisions of section 25. We are of the opinion that by section 25 it is clearly stipulated that where any firm is liable to pay tax under the said Act, the firm and each of the partners of firm are jointly and severally liable for such payment. Therefore, despite a contract to the contrary neither the firm nor any of the partners of the firm can avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners and for the purpose of this Act even retiring partner would continue to incur the liability. We are, therefore, of the opinion that the Tribunal was right in holding that despite condition No. 4 of the said deed both the applicants continued to be liable for payment of tax of the firm along with the other two continuing partners. 8.. It may be mentioned at this stage that Mr. Pathak has sought reliance upon the decision of the Supreme Court in the case of Deputy Commissioner of Sales Tax v. K. Kelukutty reported in [1985] 60 STC 7. In the case before the Supreme Court there was one partnership firm carrying on business in the name and style of M/s. K. Kelukutty consisting of 6 partners. Same partners also carried on the business in the name and style of M/s. K.K.K. Sons Saw Mills. For the assessment years 1968-69 and 1969-70 the turnover of business of M/s. K.K.K. Sons Saw Mills was not assessed to sales tax and since the two partnership firms were run by the same six individuals the Sales Tax Officer treated their business as business of single partnership firm and included the turnover of business of M/s. K.K.K. Sons Saw Mills in the business of M/s. K. Kelukutty. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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