Continuity of Tax Proceedings after Partition or Dissolution : Clause 503 of the Income Tax Bill, 2025 Vs. Section 283 of the Income-tax Act, 1961

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....g notices when a Hindu Undivided Family (HUF) is disrupted by a total partition, or when a firm or association of persons is dissolved. These provisions are crucial for maintaining the continuity of tax proceedings and safeguarding the revenue's interest, even as the legal status of the taxpayer entity changes. This commentary provides a comprehensive analysis of Clause 503, explores its objectives and practical implications, and undertakes a detailed comparative analysis with Section 283, elucidating both the continuity and evolution of the law in this area. Objective and Purpose The legislative intent behind both Clause 503 and Section 283 is to ensure that the dissolution or partition of a taxable entity does not frustrate the prop....

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....person is dead, then on all adults who were members of the Hindu family immediately before the partition. * Triggering Event - Total Partition: The provision is activated only after the Assessing Officer formally records a finding of total partition u/s 315. This ensures that the partition is not merely a private arrangement but is recognized for tax purposes. * Recipient of Notice - Last Manager: The primary recipient is the last manager (Karta) of the HUF. The Karta is traditionally responsible for managing the affairs of the HUF, and hence is an appropriate representative for tax matters. * Contingency - Death of Last Manager: If the last manager is deceased, the provision shifts the responsibility to all adults who were members of....

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....fore dissolution. 3. Legislative Continuity and Minor Drafting Changes The language of Clause 503 is materially similar to Section 283, with minor modernizations. The cross-reference to the relevant section for recording partition (Section 315 in the 2025 Bill, as opposed to Section 171 in the 1961 Act) reflects the renumbering and potential restructuring of the Act in the new Bill. The phraseology is updated for clarity, but the substantive legal position is unchanged. Comparative Analysis With Section 283 of the Income-tax Act, 1961 1. Structural and Textual Parity Both provisions are structurally identical, with two sub-sections: one for HUF partition, the other for firm/AOP dissolution. The language is consistent, maintaining conti....

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....nd streamline the Act, but does not alter the operative effect of the provision. Potential Ambiguities and Issues * Definition of "Total Partition": The requirement of a finding of "total partition" is crucial. Disputes may arise as to whether a partition is total or partial, and whether the finding by the Assessing Officer is valid. This has been a recurring issue in litigation. * Identity of Recipients: The determination of who was the "last manager" or which adults were members "immediately before the partition" may require factual investigation, especially in large or complex HUFs. * Service on Deceased Persons: If the last manager is deceased, service on all adult members may lead to practical difficulties, especially if some me....