9911796707
TMI Blog1991 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... partners are Pramila Krishna, Sarada Vijayan and Pavizham Madhavan Nair, among whom the last mentioned alone is an original partner. Though the firm as such did not have any income-tax liability, Channaiah was indebted to the Income-tax Department for arrears due in respect of a certificate dated June 12, 1968, forwarded by the Incometax Officer, Central Circle-I, Bangalore, and the interest payable under section 220(2). One-third share of Channaiah in the partnership assets was kept under attachment by exhibit P-2 order dated December 28, 1968, issued under rule 32 of the Second Schedule to the Income-tax Act, 1961, before the death of Channaiah. Exhibit P-2 was not pursued further. On January 5, 1978, long after the death of Channaiah, the Income-tax Officer, Mysore, issued exhibit P-7 notice to the firm under section 226(3) demanding the tax due from Channaiah. The firm was informed that on failure it will be treated as a defaulter. That was followed by long correspondence, but nothing took place. The firm wanted to sell its estate in Tamil Nadu for Rs. 35 lakhs. For that purpose, a clearance certificate from the Income-tax Department was necessary. The petitioner offered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and upkeeping the estate after the death of Channaiah. The main objection is that this court is not having jurisdiction to entertain the original petition. Other contentions are : (1) Attachment evidenced by exhibit P-2 was not challenged and hence original petition will not lie for that reason also, (2) the petitioner is estopped from claiming back any amount as the clearance certificate was obtained and deposit made on agreed basis, and (3) the claim of the Department has preference over all liabilities. I do not think that want of jurisdiction is a fair contention. It is true that, as contended by the Department, the liability arose and the attachment was made outside the jurisdiction of this court. The respondents are residing outside the State and the property is also in Tamil Nadu. Basing on the decision in Election Commission v. Saka Venkata Rao, AIR 1953 SC 210 and K S. Rashid and Son v. L T. Investigation Commission [1954] 25 ITR 167 ; AIR 1954 SC 207, Mr. N. R. K. Nair, on behalf of the respondents, said that article 226 of the Constitution places a two-fold limitation upon the exercise of the right. In the first place, the power is to be exercised only throughout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of action means a bundle of essential facts which it is necessary for the party seeking relief to prove, if denied by the opposite party, in order to secure the relief prayed for. If one of such essential facts required to be proved to secure an order has arisen within the territory of this court, it will definitely have jurisdiction to entertain the original petition. Cause of action is thus a bundle of facts enabling a party to maintain a legal proceeding. I am in full agreement with the views in this respect expressed in the decisions in Veeri Chettiar (L. V.) v. STO, [1970] 26 STC 579 ; AIR 1971 Mad 155 and D. L Suresh Babu v. Institute of Chartered Accountants of India, AIR 1983 Kar 43. If, at least, a limb of the bundle of facts is available, seen or discernible in one particular place which is a seat of the High Court, then, such court can exercise all the powers conferred under article 226 notwithstanding the fact that the authority against whom the rule is to be ultimately issued and whose act has created a cause of action in whole or in part is situate outside its territorial limits. Remittance of the amount by the petitioner was on the basis of exhibit P-2. The sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout even observing the principles of natural justice quite against the tenor of the understanding between the parties as is evident from the correspondence. The petitioner did not obtain the clearance certificate on the agreement to pay the entire amount without claiming any liability. It was only forced to remit the amount because it was in need and the Department was in a commanding position. The plea that the Department is having preference also cannot be heard on the facts of this case. Preference, if any, could only be against other creditors. The Department cannot have any better claim as against the firm than Channaiah into whose shoes it stepped by the notice under section 226(3). The maximum that could be claimed by the Department is only what Channaiah himself could have claimed from his share. Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The relationship arises from contract and not from status. When one partner dies, there is a reconstitution of the firm by the remaining partners or by admission of legal representatives or new partners. The new firm takes over the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e death of Channaiah for maintaining and improving the estate till the date of sale also will have to be deducted. But, normally, such expenses must have been met only from the profits of the estate. The contention of the petitioner is that there was no such income as the estate was not yielding and there was strike. The claim made by the petitioner may be exaggerated. That is the factual question to be considered by the Income-tax Department while settling accounts. Anyhow, there cannot be any dispute regarding the fact that, on principles of law, the respondents are entitled to appropriate out of the amounts in deposit only the net amount due to Channaiah after deducting the expenses and liabilities in the light of what is stated above. Exhibits P-25 and P-29 at any rate are liable to be quashed. The original petition is, therefore, allowed. Exhibits P-25 and P-29 are hereby quashed. The respondents are hereby directed to settle the accounts in the light of what is stated in the previous paragraph. After such settlement, the net amount found due to Channaiah as his one-third share alone will be appropriated towards his income-tax arrears. The balance amount will be refunded to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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