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TMI Blog1982 (8) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... r a partnership deed dated May 15, 1944, and at the relevant period consisted of 13 partners including one limited company, namely, petitioner No. 4. It would appear that by 1954 serious disputes had arisen between the partners, which disputes were referred some time in October, 1954, to the arbitration of Shri Morarji Desai and Shri G. D. Birla, who gave their award on May 29, 1956. A copy of the said award is annexed at Ex. A to the petition and my attention was drawn to cls. 4, 8, 10, 15 and 16 of the said award. We are concerned in this petition with the excess profits tax payable by the firm of Agarwal and Co. for the accounting periods November 2, 1943, to October 17, 1944, October 18, 1944, to November 5, 1945, and November 6, 1945, to March 31, 1946. The aggregate amount of excess profit taxes payable by the said firm in respect of the three chargeable accounting periods indicated above came to Rs. 32,23,607 and this amount appears to have been paid by the firm on March 31, 1956. It would appear that on March 8, 1960, in appeals preferred by the assessee-firm, all the three assessments were set aside by the AAC and thereafter on June 9, 1960, the concerned EPT Officer mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (in this section referred to as the regular assessment) under section 14, may, at any time after the expiry of the period specified in the notice issued under subsection (1) of section 13 as that within which the return therein referred to is to be furnished, and whether the return has or has not been furnished, proceed to make in summary manner a provisional assessment of the amount by which the profits of the chargeable accounting period exceed the standard profits, and the amount of excess profits tax payable thereon ...... (7) If, when a regular assessment is made in due course under section 14, the amount of excess profits tax payable thereunder is found to be less than that determined as payable by the provisional assessment, any excess of tax paid as a result of the provisional assessment shall be refunded to the assessee together with interest at 5 per cent. per annum calculated from the date of Payment of such excess tax to the date of the order of refund, both days inclusive." (underlining supplied). Mr. Dwarkadas appearing on behalf of the petitioners has very strenuously relied on the words " calculated from the date of payment ...... to the date of the order of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third letter dated March 9, 1965, reply is given by one of the partners of the said firm to the said ITO. It is clear, however, from the subsequent correspondence, Ex. C collectively, that the agreement which was to be signed was in fact not signed by or on behalf of the partnership firm. This being the admitted position, it would be very difficult to uphold the petitioners' plea that there was a binding, effective or concluded, settlement under which the Department had agreed to make refund to the five groups indicated in para. 6 of the petition and to no other. The plea of the petitioners as to the impropriety of the adjustment made by the ITO based on the settlement must, therefore, be negatived. Mr. Dwarkadas, however, seems to be on the firmer foundation when he impugned the adjustments made as disclosed in Ex. J collectively on the plea that such making of notional refunds in favour of individual partners and thereafter adjusting the same against tax liability due from them is contrary to the express provisions of the E.P.T. Act, 1940, read with the provisions of the I.T. Act. This argument may now be fully indicated and dealt with. Under s. 21 of the E.P.T. Act, 1940, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment as also ultimate regular assessment on the said entity, namely, the partnership firm of Agarwal and Co., and had not assessed the 13 partners of the said partnership firm jointly. He had certainly a right under sub-s. (3) of s. 14 to assess the partners jointly but he chose not to do so and had assessed the said partnership firm and treated the same as an assessee. Mr. Joshi very strenuously urged that in the strict theory of jurisprudence a partnership firm does not possess a legal personality. This is certainly the position in English common law as also in our law, but various statutory provisions contain and incorporate certain special provisions for firms to limited extent modifying the strict jurisprudential theory. For example, if a firm is duly registered as prescribed by the Partnership Act, such firm, although not possessing a legal personality, is accepted as a plaintiff under the Civil Procedure Code. A person having a claim against a firm can sue the firm in the firm name. Similarly, the I.T. Acts, both the earlier one of 1922 and the latter one of 1961, have recognized firms as entities for the purposes of liability to pay tax and for making the assessment. Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased, Karundia. This was done by the Epr Officer but was held not to be proper or legal by the Supreme Court. These observations were made in the context of deciding whether the ITO, Bombay, was or was not a necessary party to the writ petition subsequently preferred in the Punjab High Court, but are quite pertinent on the point. It is the clear view expressed by Hegde J., who spoke for the Division Bench, that the refund was a part of the assets of the dissolved firm. Hence, it was not possible to fix any-portion of the amount to be refunded as the assets of one of the deceased partners and the payment according to the Supreme Court made by the ITO, Rajahmundry, to the ITO, Bombay, was only considered as an interdepartmental arrangement and not equivalent to a legal discharge. Indeed " they have expressly held that the ITO, Rajahmundry, was liable to refund the entire excess amount and his payment to the ITO, Bombay, must be regarded as an unauthorised payment, and that fact will not afford him a valid defence. Mr. Dwarkadas submitted that if the principles enunciated in the observations to be found on page 575 of the above decision were to be applied to the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arwal and Co. I must then hold that the adjustment either from the principal amount of refund or from the amount of interest payable on the excess amount of the separate liability for tax of the individual partners cannot be regarded or accepted as proper or valid and if invalid and illegal the petitioners must succeed in their principal contention. However, I do not think that this is a fit case for granting to the petitioners the full refund which they have claimed in prayers (a)(i) and (b)(i). I will briefly indicate why the refund should be restricted to the adjustment made in respect of the first five partners as indicated in Ex. J collectively. These five partners are, (1) Kedarnath Hitanand, (2) Matadin Hariram, (3) Onkarmal Ghansham, (4) Radhakishan Sagarmal, and (5) Thakarlal Mukhram. In the strict theory of the law the adjustments made in respect of each of the 13 partners would be improper. However, the latter 8 of these 13 partners (shown at serial Nos. 6 to 13 in ex. J collectively) are the parties who are entitled to the refund of the excess amount but who had received a benefit from the said order inasmuch as their individual tax liability has been set off against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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