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TMI Blog1982 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... him individually on the same income. The assessment for 1978-79 was sought to be revised by the Commissioner under s. 264 of the Act. The ITO rejected the four applications under s. 154 of the Act. The petitioner filed revisions under s. 264 of the Act. The Commissioner, however, dismissed the revisions by his order, dated February 2, 1982, on the ground that the matter did not fall within the ambit of s. 264 of the Act, since it challenged the constitutional validity of a statute. The stand taken by the petitioner is that the firm was not a legal person. It is only a forum for the partners to function. For the sake of convenience the Legislature decided to make the firm provisionally, and the partners finally the assessees. The income of the registered firm when allocated in the hands of the partners was nothing but receipt of distributed income and not income within the meaning of s. 2(24) of the Act, and when the income of a registered firm was by operation of law diverted towards the partners, nothing was left in the hands of the firm and the firm as such had no income. The tax recovered from the firm had to be refunded to the partners and the petitioner was entitled to cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "income-tax is tax on a person in relation to his income ...... The tax is not made a charge on the income upon which it is levied ". Each of the assessable entities enumerated in s. 2(31) is a distinct entity and can be taxed as such in accordance with and subject to the other provisions of the Act. The Act has made provisions relating to the assessment of registered firms. Section 67 of the Act provides for the method of computing a partner's share in the income of the firm. Section 182 of the Act, which deals with the assessment of registered firms, lays down that after assessing the total income of the firm, (i) the income-tax payable by the firm itself shall be determined, and (ii) the share of each partner in the income of the firm shall be included in his total income and assessed to tax accordingly. Section 86(iii), on the other hand, makes a provision that tax is not payable by a person who is a partner of an unregistered firm in respect of that portion of the income of the firm upon which tax is payable by the firm. Thus, specific provisions have been made in the Act relating to the income of a registered firm as well as that of an unregistered firm. Similar provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the individual parties to the joint venture, and he having exercised that Option, it was not open to him thereafter to reassess the same income collectively in the hands of the three parties to the joint venture in the status of an unregistered firm. The ITO could not, however, seek to assess the same income twice, once in the hands of the partners and again in the hands of the unregistered firm. Both the cases referred to above arose under the 1922 Act, and related to unregistered firms (and/or association) of persons. No analogy can be drawn between the case of an association of persons or an unregistered firm and the case relating to a registered firm and its partners. The Act specifically provides for assessing the income in the hands of a registered firm and thereafter the share of such income received by the partners. The dictum laid down in the case of an association of persons or an unregistered firm cannot be extended to the case of a registered firm regarding which there is an express provision in the Act. Reliance was also placed on the decision of this court in Addl. CIT v. Smt. Triveni Devi [1974] 97 ITR 390 (All). In that case, the business premises of the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt consideration for the purpose of s. 23(5)(a). For the purpose of the Act, a registered firm is an entity by itself. Its income is liable to be taxed in its bands. Similarly, the share of profits realised by the partner of registered firm has to be deemed as the income of the partner in view of s. 23(5)(a). Therefore, the same is again liable to tax. For the purposes of the Act, a deemed income can also be made the subject-matter of tax: (see CIT v. Bhogilal Laherchand [1954] 25 ITR 50 (SC)). Whether both the registered firm as well as its partners should be subjected to tax in respect of the same earning is a matter of legislative policy. The court also repelled the contention that s. 14(2)(aa) of the Act was void being in conflict with the equality clause enshrined in art. 14 of the Constitution. The argument that the provisions of ss. 67 and 182 of the Act are discriminatory is wholly untenable. It is true that when a Hindu joint family is assessed to tax, its members are exempt from tax, when an unregistered firm is subjected to tax its partners are exempt from tax, but when it comes to the case of a registered firm, not only the firm is made liable to pay tax, but also its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm itself has to be assessed and the share of each partner in the income of the firm has to be included in his total income and assessed to tax accordingly. If any double taxation is involved, the legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over. " Dealing with its earlier decision in the case of Murlidhar Jhaway and Purna Ginning and Pressing Factory [1966] 60 ITR 95(SC), it was observed that the decision in that case could not be of much assistance as it related to an unregistered firm and to an assessment of the accounting year ending November 6,1953. The provisions which came up for consideration had no parallel to those made in respect of a registered firm by an express amendment of s. 23(5) by the Finance Act of 1956. It was observed that the facile analogy of passage of money given by Rowlatt J. in IRC v. Frank Bernard Sanderson [1921] 8 TC 38 (KB) will not carry the matter further where the statute had made an express provision for the income of the firm and the income in the hands of the partners being both liable to tax. In our opinion, the points ..... X X X X Extracts X X X X X X X X Extracts X X X X
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