9911796707
TMI Blog1978 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets and liabilities of the said firm had been divided in terms of the said settlement. On March 5, 1973, the petitioner had been served with a notice purporting to be under s. 182(4) of the I.T. Act calling upon M/s. Tarapore and Company, the new concern, to pay a sum of Rs. 1,49,287 stated to be 30% of the share income of C. S. Loganathan for the assessment years 1962-63 to 1965-66 and 1967-68. Subsequently, an order under s. 154 dated March 30, 1976, has been passed by the first respondent whereby the original notice dated March 5, 1973, issued under s. 182(4) was modified and an additional demand for Rs. 8,49,353 in addition to the demand of Rs. 1,49,287 was made. The order dated March 30, 1976, passed under s. 154 further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the share income from the firm for those years, and that in any event the firm's liability under s. 182(4) is restricted to 30% of the share income of the deceased partner. On these facts, the petitioner has raised the following additional grounds. (1) The firm having paid a sum of Rs. 9,87,591.63 towards the tax due from the late Loganathan in respect of his share income from the firm in addition to the sum of Rs. 1,58,790 paid as annuity deposit for the assessment years 1964-65 and 1965-66, the notice issued on the firm after its dissolution and served on the petitioner demanding a sum of Rs. 9,98,640 is wholly without jurisdiction. (2) That the ITO has not established that the tax to the extent of 30% of the share inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed percentage of the share income of partner till the tax liability in respect of that share income is satisfied. It is also the respondent's case that under the provisions of s. 189(3) of the Act and the Explanation thereto any demand issued under s. 182(4) can be enforced even after the dissolution of the firm by proceeding against the surviving partner or the continuing partner, as the case may be, that the total arrears payable by the deceased, Loganathan, as on November 30, 1977, was Rs. 50,64,880 and the value of the known assets left by him was only Rs. 20,00,000, and that as the assets left are not enough to meet the tax liabilities, the demand issued against the petitioner under s. 182(4) is tenable in law. With reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termining the quantum payable by the firm under that section. We are not in a position to accept the contention put forward on behalf of the revenue that the payments made by the firm for the relevant assessment years daring the lifetime of the deceased, Loganathan, cannot be taken into account while determining the tax liability of the firm under s. 182(4). Section 182(4) reads as follows: " A registered firm may retain out of the share of each partner in the income of the firm a sum not exceeding thirty per cent. thereof until such time as the tax which may be levied on the partner in respect of that share is paid by him; and where the tax so levied cannot be recovered from the partner, whether wholly or in part, the firm shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion sought to be put forward on this provision by the revenue is to be accepted, then all the payments made by the firm towards the partner's liability during his lifetime will have to be excluded and the 30 per cent. prescribed in the section will have to be worked out on the balance of the tax due by the deceased partner. This will mean that the 30 per cent. referred to in the section becomes so indefinite that the firm may not be able to guess as to what is the 30 per cent. that it has to retain out of the share of profits at a particular time. The stand taken by the revenue that the liability of the firm is to pay 30 per cent. of the balance of the tax that is found, due from the deceased partner at the time of invoking s. 182(4) will l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 firm. 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 absolve the firm from the liability cast upon it under section 182(4). The provision enabling the firm to retain part of the income of the partners is meant for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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