Separate legal personality limits tax recovery against partnership assets and confines enforcement to liable partners' shares

A partnership firm's properties could not be attached for sales tax arrears owed by separate private limited companies merely because some partners were also directors of those companies, since a company is a distinct legal entity and its dues cannot be recovered from directors' property. For arrears of another partnership firm, recovery could proceed only against the shares of the common partners and not against the interests of the other partners who had no liability for those arrears. The permissible recovery was therefore confined to the lawful extent of the common partners' interests, and attachment of the entire partnership property was impermissible.

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Issues: Whether the properties of a partnership firm could be attached for sales tax arrears of other entities in which some of its partners were also directors or partners, and whether recovery could extend beyond the shares of the common partners.

Analysis: The attachment could not be sustained as against the petitioner-firm's properties on the footing that its partners were also directors of two private limited companies, since a company is a separate legal entity and its dues cannot be recovered from the directors' properties. As regards the arrears of another partnership firm, the revenue could proceed only against the shares of the common partners and not against the interests of the other partners who had no liability for those arrears. The Court therefore limited the permissible recovery to the extent of the common partners' shares and held that attachment of the entire partnership property was impermissible.

Conclusion: The impugned attachment was invalid insofar as it proceeded against the petitioner-firm's properties for the liabilities of the two companies and beyond the common partners' shares for the liability of the other firm; recovery was confined to the lawful extent of the common partners' interests.

Final Conclusion: The writ petition succeeded in part, with the attachment set aside to the extent it exceeded the permissible recovery from the common partners' shares, and the remaining attachment to be raised on payment of the recalculated dues.

Ratio Decidendi: Tax recovery from partnership assets cannot extend to the interests of partners who are not liable for the debt, and separate legal personality prevents recovery of a company's dues from the personal properties of its directors.

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