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TMI Blog1958 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ong the three other partners was a man by the name of Iyer. This firm was dissolved on the 11th of September, 1950, and the deed of dissolution provided for the business of the firm being continued by Iyer and under that deed Iyer succeeded to the firm and carried on the business of that firm. The firm was a registered firm and it was assessed for the assessment year 1949-50 and the shares of the profits of the four partners were allocated to each one of them under the provisions of the Income-tax Act and each of the partners was assessed to tax on his share of the profits. The petitioner and the other three partners paid the tax which they were liable to pay in respect of their respective assessments. Iyer failed to do so and the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or association of persons has been discontinued, or where an association of persons is dissolved", then comes" every person who was at the time of such discontinuance or dissolution a partner of such firm or a member of such association shall" and then comes the liability which is imposed upon him to pay tax jointly and severally with every other partner. Now, the first important aspect of this section which should be noticed is that, when the section refers to a firm, it does not speak of the discontinuance of that firm, but it speaks of the discontinuance of the business of the firm. The distinction between the two expressions is vital. A firm may be discontinued; a firm may be dissolved; a new firm may come into existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of discontinuance of the business and not of succession. If any authority was needed for this proposition, we may hark back to the Privy Council which, in Polson's case reported in Commissioner of Income-tax v. P.E. Polson [1945] 13 I.T.R. 384, stated as far back as 1945 that the law with regard to discontinuance was clear and well settled in India. At page 388 the Privy Council, after citing certain Indian authorities, stated: ".............and it had been uniformly decided that these words (namely, discontinuity and discontinuance) did not cover mere change of ownership but refer only to a complete cessation of the business. Their Lordships entertain no doubt of the correctness of these decisions, which appear to be in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed either for the year in which the succession took place or in the year preceding that year because he cannot be found, then the assessment can be made on the successor, and even when the person succeeded has been assessed but does not discharge his liability to pay tax, tax may be recovered from the successor both with regard to the year in which the succession took place and the year previous to that. Therefore, the proviso to this sub-section casts a liability upon the successor to the business when the person succeeded does not discharge his liability. In other words, applying this proviso to the facts of this case, if the petitioner had failed to pay tax for which he was assessed, then the liability would have been upon Iyer who is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case, the only section under which liability can be imposed upon the petitioner is section 44. That is indeed a curious argument coming from counsel for the Taxing Department. Surely we cannot stretch the language of section 44 or put a construction upon it which it will not bear merely in order to enable the Taxing Department to recover the tax from the petitioner which someone else was liable to pay and which someone else has failed to pay. It is for the Taxing Department to come to us and tell us under which provision of the law this liability is sought to be imposed upon the petitioner. If there is no provision, liability cannot be fastened upon the petitioner. In view of our decision, we do not think it necessary to permit Mr. Palkh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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