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TMI Blog1971 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... n 13th October, 1967. The newly constituted partnership firm consists of the sons, mother and daughter-in law and a third party. It is not in dispute that this new firm got itself registered as a dealer, after its constitution on 15th October, 1967, and obtained new and separate registration certificates both under the Madras General Sales Tax Act and under the Central Sales Tax Act. For the year 1966-67, the old firm of the Ammonia Supply Corporation was assessed to sales tax both under the Madras General Sales Tax Act and under the Central Sales Tax Act. The assessing authority considered the objections of the assessee and passed the impugned order dated 9th January, 1968. In the very same order, notice in form 3 was issued to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. Section 27 of the Act has no application whatsoever. Section 27 provides a safeguard for the recovery of taxes where the business of a dealer is transferred. In order to circumvent motivated and designed transfers for the purpose of avoiding tax, the Legislature has provided that notwithstanding such a transfer, whether real or benami, the transferee would also be liable along with the transferor for all such taxes which remained unpaid at the time of the transfer. In fact, section 27 provides that any tax or other amount due up to the date of transfer, though unassessed, may also be recovered from the transferee without prejudice to the right of the revenue to take such appropriate action for its recovery from the transferor. The es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business also is within the same compass. But these factual details by themselves cannot dislodge the legal status which the new partnership secures in the eye of law by a voluntary constitution of such a firm by agreement between the new partners. By such an agreement, the consensus between the newly constituted members of the petitioner, therefore, brings a firm which has no nexus legally with the old firm. The fact that the trading style is the same and some of the members of the new partnership were members of the old partnership, or all the members of the new and the old partnerships are related, and belong to one family, are all extraneous material for consideration, which cannot weigh while deciding whether the newly constituted firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such. It is only a demand for payment of tax concerning the quondam firm. Therefore, it follows that, that part of the order of the assessing authority that a notice of demand shall issue to the petitioner-firm for recovery of the tax due by the quondam firm, is erroneous and, therefore, the rule nisi is made absolute, and the writ petition is allowed. There will be no order as to costs.
The revenue is at liberty to proceed and recover the arrears of tax payable by the quondam firm by proceeding against the assets of the erstwhile firm or against its partners individually, in accordance with the prescribed procedure under the Madras General Sales Tax Act and under the common law.
Petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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