Deemed partnership and joint liability bar collateral challenge to tax assessment in recovery proceedings.
A minor admitted to the benefits of a partnership who, after attaining majority, does not exercise the statutory option to repudiate partnership is deemed to become a partner and may be personally, jointly and severally liable for the firm's sales tax and penalty dues when recovery is pursued. In recovery proceedings, the Magistrate cannot examine the validity or correctness of the underlying assessment orders, because collateral challenge is barred and the assessed tax must be treated as due. The revision petitions therefore failed, and the recovery orders were left undisturbed.
Issues: (i) Whether minors admitted to the benefits of a partnership, who did not exercise the statutory option after attaining majority, could be treated as partners and held personally liable for the firm's sales tax and penalty dues when recovery was sought; (ii) Whether, in proceedings under the recovery provision, the validity of the assessment orders could be challenged before the Magistrate.
Issue (i): Whether minors admitted to the benefits of a partnership, who did not exercise the statutory option after attaining majority, could be treated as partners and held personally liable for the firm's sales tax and penalty dues when recovery was sought.
Analysis: Under the law of partnership, a minor cannot be a partner, but may be admitted to the benefits of partnership. If, after attaining majority, such person does not give the prescribed public notice within the statutory period electing not to become a partner, he is deemed to have become a partner. Once the firm's tax liability became enforceable and demand notices were served, the petitioners were already to be treated as partners. The sales tax liability had arisen during the period when they were minors, but enforceability followed assessment and notice, by which time the statutory consequences of section 30 of the Partnership Act had operated. In addition, the sales tax statute made every partner jointly and severally liable for amounts due from the firm.
Conclusion: The petitioners were personally and jointly liable along with the firm, and this contention was decided against them.
Issue (ii): Whether, in proceedings under the recovery provision, the validity of the assessment orders could be challenged before the Magistrate.
Analysis: The statutory scheme provided separate remedies against assessment orders and also contained a bar against collateral challenge in recovery proceedings. A Magistrate acting under the recovery provision was required to proceed on the footing that the assessed tax was due and could not examine the legality or correctness of the assessment. The challenge to the assessment, therefore, could not be entertained in the recovery applications.
Conclusion: The assessment orders could not be questioned in the recovery proceedings, and this contention also failed.
Final Conclusion: The revision petitions failed in entirety, and the recovery orders directing enforcement of the tax and penalty dues were left undisturbed.
Ratio Decidendi: A minor admitted to the benefits of partnership who does not repudiate partnership after attaining majority is deemed to become a partner, and where the sales tax statute imposes joint and several liability on partners, such liability extends to recovery proceedings in which the assessment itself cannot be collaterally challenged.
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