1967 (12) TMI 55 - HC - VAT and Sales Tax

Partition followed by partnership: No transfer, tax act inapplicable. Prohibition writs granted.

The court held that in cases of partition followed by a partnership, no transfer occurs, and section 27 of the Madras General Sales Tax Act does not apply ... - Issues:1. Whether the respondent has the authority to reassess the petitioner for escaped turnover for certain years after a partition and formation of a partnershipRs.2. Interpretation of section 27 of the Madras General Sales Tax Act in the context of partition and formation of a partnership.3. Comparison of provisions in the Indian Income-tax Act with the Madras General Sales Tax Act regarding assessment after partition.4. Examination of relevant case laws to determine the applicability of assessing members of a joint family after dissolution.Analysis:The petitioner, a partnership firm, sought a writ of prohibition against the Deputy Commercial Tax Officer to prevent reassessment for escaped turnover for the years 1959-60 to 1962-63 after a partition and formation of a partnership. The petitioner contended that post-partition, the partnership should be assessed, not the former joint Hindu family. The respondent relied on section 27 of the Madras General Sales Tax Act, which deals with transfer of business ownership. However, the court held that in cases of partition followed by a partnership, no transfer occurs, and section 27 does not apply, as there is no transfer of ownership. The court compared this with the Indian Income-tax Act, highlighting the different language used in dealing with succession of businesses.The court referred to a case law from the Madhya Pradesh High Court, which allowed individual assessment of joint family members after dissolution, unlike the Madras General Sales Tax Act. The Supreme Court's decision in a case involving a dissolved firm further supported the petitioner's argument against assessing members of a joint family post-dissolution for past turnovers. The court emphasized the absence of provisions in the Madras General Sales Tax Act similar to those in the Indian Income-tax Act or the Madhya Pradesh Act, preventing the assessment of former joint family members after partition. Consequently, the court granted the writs of prohibition, barring the reassessment of the petitioner.