9911796707
TMI Blog1972 (9) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-9-1972 - Judge(s) : R. L. GULATI., C. S. P. SINGH. JUDGMENT The judgment of the court was delivered by GULATI J.-This is a petition under article 226 of the Constitution. The petitioner was a partner in a firm constituted under a deed of partnership dated April 3, 1967. The partnership was formed to run country liquor shops at Varanasi under a licence from the Excise Department valid for one year from April 1, 1967, to 31st March, 1968. There were altogether four partners, one of the partners being Shyam Bihari. The firm was registered under the provisions of the Income-tax Act, 1961, for the assessment year 1968-69. On the expiry of the excise licence the firm was dissolved because it did not succeed in obtaining a licence for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent of the amount retained or could have been so retained. Normally, tax due from a partner cannot be recovered from the firm. Every partner has to pay the tax assessed on him. Sub-section (4) of section 182 makes a departure from that rule and makes the firm liable for the payment of tax due from a partner in respect of his share in the income of the firm. The liability of the firm is, however, limited to 30 per cent. of the defaulting partner's share in the profits of the frim. The firm is entitled to retain a sum not exceeding 30 per cent. of the share of each partner in order to meet this liability. In the instant case, the firm did not retain anything from the share of Shyam Bihari. That circumstance, however, does not abso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax assessed against the partners will be recoverable from them. Reading the provisions of section 182(4) and section 189(3) together, the position is like this. A dissolved firm may be assessed under section 189(1) as if no dissolution had taken place. If it is assessed as a registered firm, the tax assessed on the partners shall be payable by them, but where the tax from a partner cannot be recovered, it shall become the liability of the firm under section 182(4) and by virtue of sub-section (3) of section 189, it shall become the joint and several liability of the partners. In order that section 182(4) may be invoked, there must exist two conditions : (1) that the tax is not recoverable from the partner on whom it has been assessed ; (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, no such implication can arise merely because contractual liabilities of a firm may be jointly and severally enforced against the partners. The proposition enunciated by the Supreme Court holds good only under the Indian Income-tax Act, 1922 (hereinafter called the "old Act" which contains no provision analogous to section 182(4) of the Income-tax Act, 1961 (hereinafter referred to as the "new Act"). This new provision casts statutory liability upon the firm to pay the tax of a defaulting partner, and where the firm is dissolved, the liability becomes the joint and several liability of each partner by virtue of section 189(3) of, the new Act. Section 44 of the old Act corresponds to section 189 of the new Act, but that provision by its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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