TaxTMI 
TaxTMI 
1978 (3) TMI 5
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....2-63 to 1965-66 and 1967-68. Subsequently, an order under s. 154 dated March 30, 1976, has been passed by the first respondent whereby the original notice dated March 5, 1973, issued under s. 182(4) was modified and an additional demand for Rs. 8,49,353 in addition to the demand of Rs. 1,49,287 was made. The order dated March 30, 1976, passed under s. 154 further stated that the share income of the partner had undergone change as a result of appeals, etc., and 30% of the share income as the basis of the revised figures worked out to Rs. 9,98,640. The petitioner' filed a revision application under s. 264 of the Act before the second respondent for revising the order passed by the first respondent under s. 182(4) contending that the said demand for Rs. 9,98,640 is not tenable in law, for the following reasons : (1) The first respondent has no jurisdiction to invoke the provisions of s. 182(4) for recovering the tax due by the deceased partner of the erstwhile firm from the petitioner ; (2) the provisions of s. 182(4) are not applicable since the firm had already been dissolved; and (3) that s. 182(4) read with s. 189(3) renders the section inapplicable to any period prior to Octob....
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....ecame necessary as a result of an arithmetical mistake in the calculation of 30% of the share income and that, therefore, a revised order dated March 30, 1976, was passed by the first respondent determining the income as Rs. 9,98,640. According to the respondents, the erstwhile firm was bound to retain 30% of the share income of the partner, and if the tax becomes irrecoverable from the partner, the firm is automatically liable to pay the amount and that it is the statutory duty of all the firms to retain the prescribed percentage of the share income of partner till the tax liability in respect of that share income is satisfied. It is also the respondent's case that under the provisions of s. 189(3) of the Act and the Explanation thereto any demand issued under s. 182(4) can be enforced even after the dissolution of the firm by proceeding against the surviving partner or the continuing partner, as the case may be, that the total arrears payable by the deceased, Loganathan, as on November 30, 1977, was Rs. 50,64,880 and the value of the known assets left by him was only Rs. 20,00,000, and that as the assets left are not enough to meet the tax liabilities, the demand issued against t....
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....retained. " The above provision enables a registered firm to retain out of the share of each partner in the income of the firm a sum not exceeding 30 per cent. thereof until the partner has paid the tax in respect of his share of the firm's income and that if the partner commits default in paying the tax, the firm is liable to pay the tax to the extent of the amount which the firm is entitled to retain as stated above, irrespective of the question whether the firm had in fact retained any amount or not. This provision is more or less an exception to the general rule that the tax levied on a partner of a registered firm cannot be recovered from the firm or from the other partners. In the case of a registered firm, its profits are apportioned between the partners and each partner's share of such profits is taxed in his hands. In this case, admittedly the firm has paid the various amounts amounting to Rs. 9,87,591.63 towards the tax due by the partner on his share of profits. Section 182(4), however, creates a direct liability on the firm to pay 30% of the share of profits of the partner if the tax which may be levied on the partner in respect of his share is not paid by him or whe....
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....ue from a partner cannot be recovered from the firm. Every partner has to pay the tax assessed on him. Sub-section (4) of section 182 makes a departure from that rule and makes the firm liable for the payment of tax due from a partner in respect-of his share in the income of the firm. The liability, of the firm is, however, limited to 30 per cent. of the defaulting partner's share in the profits of the firm. The firm is entitled to retain a sum not exceeding 30 per cent. of the share of each partner in order to meet this liability. In the instant case, the firm did not retain anything from the share of Shyam Bihari. That circumstance, however, does not absolve the firm from the liability cast upon it under section 182(4). The provision enabling the firm to retain part of the income of the partners is meant for its benefit but if it does not avail of the benefit, its liability under this provision is not affected. This position is not altered even if the firm is dissolved or its business is discontinued. Dealing with the question as to whether the liability of the firm under s. 182(4) could be enforced after the dissolution of the firm or its discontinuance of the business, the c....