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TMI Blog1983 (2) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act, 1961 ('the Act'). The ITO did not accept these contentions. He held that as section 182(3) of the Act is only a machinery section, the ITO has got the option to assess the non-resident partner directly. Hence, the share income of Rosebrook (the assessee) from the two firms in which she is a partner can also be included in her assessment. He also held that the provisions of section 64(1)(iii) are mandatory. Hence, the share income of the minor daughter in the firm of Bangalore Co. is includible in the assessment of the assessee under section 64(1)(iii). The assessee appealed to the AAC. He held that section 64(1)(iii) is a special provision and it will have to prevail over the general provision. Under section 182(3) only tax on the share income of a non-resident should be assessed and it should be paid by the firm. But section 182(3) comes into operation after the total income of the firm is computed under section 143(3) or section 144 of the Act. In the case of a non-resident, the tax payable by the non-resident is to be recovered from the firm. Therefore, section 182 comes into operation after the assessment is completed and the scope of the section is limited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive strongly urged that a direct assessment on the non-resident is permissible wherein the share income also apart from the other income of the individual could be included. But in respect of the share income, the recovery of the tax will be made from the registered firm. He pointed out that if a non-resident is a partner in more than one firm, then each firm in which he is a partner cannot know his total income which he derives from other business or other sources apart from share income from them. Hence, for that reason, a direct assessment has to be made first. Then, in respect of the share income, it has to be assessed under section 182(3) and the tax has to be recovered from the firm. There is no double taxation as it is taxed on different hands. Thus, he justified the assessment made on the non-resident. He further urged that under section 64(1)(iii) the share income of the minor daughter who is also a non-resident is includible in the assessment of the assessee. This is a special provision and it prevails. Since the assessee has separate individual income from other business and other sources apart from the share income, in computing that income the minor's income is includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a partner of a registered firm, the tax on his share in the income of the firm shall be assessed on the firm at the rate or rates which would be applicable if it were assessed on him personally, and the tax so assessed shall be paid by the firm, Thus, sub-section (3) of section 182 is a special provision for assessing the share income of the non-resident in the hands of the firm. When such a special provision is made to make an assessment on the firm in respect of the share income of the non-resident who is partner in that firm, that share income of the non-resident from that firm cannot be included in the individual assessment of the non-resident. The other income of the non-resident excluding the share income from firms in which he or she is a partner can be assessed on the non-resident in his individual assessment. But the share income of the non-resident in a firm in which he or she is a partner cannot be included in the individual assessment of the non-resident, but has to be assessed only on the firm applying the rate applicable if that share income was assessed on the non-resident personally and the tax so assessed shall be paid by the firm. Section 23(5)(a) of the 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not, therefore, appear to be any ground for computing the income of such non-resident partner with reference to section 4(1) of the Act and for excluding the income derived without the taxable territories by the operation of section 4(1)(c). It is obvious that such a course would be called for only when the computation of the total income of the assessee is undertaken." Again it was observed as under : "...Section 17 deals with the special case of a non-resident, and provides that the tax payable by such non-resident should be calculated at the maximum rate. It is true that this section uses the expression 'total income', but in the case of a non-resident, who is a partner of a resident registered firm, this expression 'total income' should be construed in conformity with the determination of the taxable income of such non-resident partner under section 23(5). This section specifies that the nonresident's share of the firm's income is assessable and does not render the determination of the taxable income subject to the other provisions of the Act. That being so, the department is entitled to consider his share in the firm income as the total income for the purpose of levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rates which would be applicable if it were assessed on him personally and the sum so determined as payable shall be paid by the firm. It was further held that the effect of the above proviso is that as ordinarily in the case of a registered firm the share of a partner in the income, profits and gains of the firm are to be assessed in his individual return, that provision is not applicable or attracted when such a partner is a non resident partner in the taxable territories. In the case of such a non resident partner the share of such a partner in the income, profits or gains of the firm has to be assessed on the firm itself and the rate at which the computation is to be made is on the footing, that assessment is made on such non-resident partner personally. 7. In S. Sankappa's case it has been observed by the Supreme Court as under : " . . . In certain cases, after the apportionment of the income of the registered firm, the share of a particular partner, who is not resident in the taxable territories, is to be assessed to tax also as if it is the income of the registered firm. . . ." 8. The ratio laid down in the above decisions clearly applies to the instant case as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee non-resident from the two firms that the share income is assessable only on the firms under section 182(3) and not in the individual assessment of the nonresident. That finding equally applies in respect of the share income from Bangalore Co. of the minor daughter of the assessee who is also a non-resident, in view of section 182(3). Since the minor daughter of the assessee who is a partner in Bangalore Co. is a non-resident, her share income from the said firm is assessable only according to section 182(3) and under that provision, the share income of the non-resident in a registered firm is assessable on the firm at the rate or rates which would be applicable if it were assessed on him or her personally and the tax so determined shall be paid by the firm. This provision equally applies whether the non-resident is a minor or a major. Thus, the share income of the minor daughter who is a non-resident should be assessed only on the firm. Since the share income of the minor daughter is assessable on the firm in view of section 182(3), that share income cannot be included in the hands of the assessee-non-resident in her individual assessment under section 64(1)(iii) as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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