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TMI Blog1976 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... t P-2 and contended that the arrears of income-tax due from the firm, M/s. Mutual Benefit Corporation, cannot be recovered from the partners. The reply to exhibit P-2 is in exhibit P-3 and it was stated therein: "......As per the provisions of the Partnership Act, the partners are jointly and severally liable to the dues of the firm. This position in law is not in any way affected by the Income-tax Act, 1961, and, therefore, your contention that the arrears on account of income-tax dues of the firm can only be recovered from the firm is not acceptable......" The argument before us on behalf of the revenue also proceeded on the basis of the proposition stated in exhibit P-3. Counsel contended that section 2(23) of the Act incorporated the meanings attributable to the expressions "partnership", "firm" and "partner" stated in section 4 of the Indian Partnership Act for the purpose of the Act. So it was submitted that section 25 of the Partnership Act which we shall extract immediately must be taken to be a part of the Act. "25. Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner." Counsel cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other sum of money is payable under this Act, and includes-- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act." Under the Indian Income-tax Act, 1922, section 2 read as follows: "2. In this Act, unless there is anything repugnant in the subject or context :-- (2) 'assessee' means a per ion by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him. It is clear from the definitions that only a person who is liable under the Act is an assessee as defined in the Act. An order of assessment on the firm as such, which is considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court by counsel for the revenue, the Supreme Court held that the tax liability attributable to A's share of income of the firm could not be recovered from D pursuant to the assessment already made on A. The following passage from the judgment is apposite: "Undoubtedly, contractual obligations of a firm are enforceable jointly and severally against the partners. But the liability to pay income-tax is statutory; it does not arise out of any contract, and its incidence must be determined by the statute. If the statute which imposes liability has not made it enforceable jointly and severally against the partners, no such implication can arise merely because contractual liabilities of a firm may be jointly and severally enforced against the partners." The provisions of section 25 of the Partnership Act cannot be imported into the Income-tax Act, 1961, unless there is any provision to that effect in the Income-tax Act or at least there was such a necessary implication arising from the provisions thereof. We are unable to discern any such provision in the Income-tax Act. The reasoning in the judgment of the Supreme Court must apply on all fours to the case before us; the lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments on the partners. Any liability for income-tax imposed on a firm as such under the Act cannot be treated as the liability of the individual partners of the firm arising under the Act by importing the general principles of partnership law as the scheme of the Act visualises proceedings being taken against the firm or the partners only if a liability is imposed under the provisions of the Act against the firm or the partners thereof. This is the view that has been taken by the Supreme Court in the decisions that we have already referred to. The passage quoted from Simon's Income Tax Law in the judgment in Sahu Rajeshwar Nath v. Income-tax Officer is based on the decision in Stevens v. Britten. The facts of the case were the following: The plaintiff and the defendant in the suit were formerly partners carrying on a business in the name of a firm. By a deed of dissolution dated 26th February, 1951, the partnership was dissolved with effect from December 10, 1950, and the plaintiff, who retired from the partnership, assigned his interest in the business to the defendant. It was provided by clause 4 of the deed of dissolution that: "The continuing partner (the defendant) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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