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of <h1>Societies not liable for tax assessments - Members protected under separate legal entity status</h1> The court ruled that assessments on a society, termed an 'association of persons,' do not create personal liability for members to pay the tax. The ... - Issues:1. Whether assessments made on a society, styled as an 'association of persons,' impose personal liability on the members of that society to pay the tax imposed.2. Interpretation of relevant provisions of the Societies Registration Act, 1860, and the Indian Income-tax Act, 1922, in determining the liability of society members for tax assessments.3. Examination of the statutory framework to establish the distinction between a tax on a society and a tax on its individual members.4. Analysis of the circumstances under which personal liability of the members of an association may arise under section 44 of the Indian Income-tax Act.5. Evaluation of the applicability of statutory provisions in determining the liability of society members for taxes imposed on the society.The judgment addresses the issue of whether assessments on a society, characterized as an 'association of persons,' create personal liability for the members to pay the tax. The court examines the Societies Registration Act, noting that the society is a legal entity capable of suing and being sued, and its members are not personally liable for the debts of the society. The court emphasizes that a tax imposed on a society remains a tax on the society itself, not on its members, as per the statutory provisions. Despite arguments based on the Indian Income-tax Act, the court finds no provision overriding the statutory framework that negates personal liability of society members for taxes imposed on the society.Regarding the potential personal liability of association members under section 44 of the Indian Income-tax Act, the court determines that such liability arises upon the discontinuance of the association's business or its dissolution. Since no such events occurred in this case, the section does not support the department's position. The court also addresses a specific assessment for the year 1957-58, where the department alleges a discontinuance of business by the association of persons. However, lacking investigation by the Income-tax Officer, the court quashes the order based on insufficient evidence.The court highlights the absence of specific statutory provisions making society members liable for taxes imposed on the society. It emphasizes that the statutory framework governing the society explicitly prohibits personal liability for judgments against the society. Consequently, the court quashes the assessment order but allows the Income-tax Officer to investigate the liability for the tax imposed on the society for the year 1957-58, providing the petitioners with an opportunity to present their case. The court directs authorities to refrain from collecting any tax imposed on the society from the petitioners for years up to 1957-58, without awarding costs to either party.
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