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Issues: (i) Whether the deed dated 29 December 1973 was a deed of dissolution of the firm or only a deed recording retirement of two partners; (ii) whether, despite the retirement deed, the retiring partners remained liable for sales tax in the absence of intimation of retirement within the prescribed time under section 25 of the Gujarat Sales Tax Act, 1969.
Issue (i): Whether the deed dated 29 December 1973 was a deed of dissolution of the firm or only a deed recording retirement of two partners.
Analysis: The document described the outgoing partners as retiring partners and the continuing partners as successors in the same business. The firm's name, assets and business were retained, and the continuing partners were to carry on the same undertaking. The form of the document as a dissolution deed did not control its substance, which showed that the firm itself was not brought to an end.
Conclusion: The deed was only a deed of retirement of two partners and not a deed of dissolution of the firm.
Issue (ii): Whether, despite the retirement deed, the retiring partners remained liable for sales tax in the absence of intimation of retirement within the prescribed time under section 25 of the Gujarat Sales Tax Act, 1969.
Analysis: Section 25 imposed joint and several liability on the firm and its partners and contained a non obstante clause overriding any contrary contract. A retiring partner could cease to be liable for future tax only by intimating the date of retirement in writing to the Commissioner within fifteen days. If no such intimation was given, the partner's liability continued until receipt of the intimation. A private agreement shifting tax liability to the continuing partners could not defeat the statutory scheme.
Conclusion: The retiring partners continued to be liable for the tax liability of the firm because they did not intimate their retirement within the statutory period.
Final Conclusion: The reference was answered in favour of the department on both questions, and the statutory liability of the retiring partners was upheld despite the retirement arrangement between the partners.
Ratio Decidendi: Where a taxing statute makes partners jointly and severally liable and provides that a retiring partner's liability continues unless retirement is intimated in writing within the prescribed time, a private contract cannot override that statutory continuing liability.
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