9911796707
TMI Blog1990 (11) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm, Messrs. Sannanna Chetty and Sons, should have retained 30% of the share income payable to the partner, S. Rajannan, as per section 182(4) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and issued notice to the firm on June 30, 1975, to pay the amount that should have been retained under section 182(4) of the Act against the income-tax payable by the partner, S. Rajannan, for the assessment years 1962-63 and 1963-64. In response to the notice so issued, the firm, Messrs. Sannanna Chetty and Sons, took up the stand that it had not been established beyond doubt that the tax levied on the partner, S. Rajannan, could not be recovered from him and that there was also no machinery provision for enforcing section 182 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal contending that the appeals preferred by the firm, Messrs. Sannanna Chetty and Sons, before the Appellate Assistant Commissioner were not maintainable and that the provisions of section 182(4) of the Act had been properly applied. The Tribunal had no hesitation in rejecting the contentions of the Revenue and dismissing the appeals. It is, thereafter, at the instance of the Revenue under section 256(1) of the Act, that the following two questions of law, as reframed, have been referred to this court for its opinion : "(1) Whether, on the facts and in the circumstances of the case, the appeal filed by the assessee before the Appellate Assistant Commissioner against the order passed by the Income-tax Officer under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer to section 182(4) of the Act. That section states that a registered firm may retain out of the share of each partner in the income of the firm a sum not exceeding thirty per cent. thereof, until such time as the tax which may be levied on the partner in respect of that share is paid by him ; and where the tax so levied cannot be recovered from the partner, whether wholly or in part, the firm shall be liable to pay the tax, to the extent of the amount retained or the could have been so retained. The purpose behind section 182(4) of the Act appears to be this. Ordinarily, the tax due from partner cannot be recovered from the firm and every partner has to discharge the tax liability fastened on him by himself. Section 182(4) of the Act, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer and is communicated to the partners and the amount has to be retained as a sort of security by the registered firm towards the payment of the tax liabilities of the partners and has to be released only after the said liability has been duly discharged by the partner or on his behalf. From the provision under section 182 (4) of the Act and its avowed object as set out in the circular, it is obvious that it is intended as almost a salvage provision, as it were, that to realise the tax payable by the partner, when not paid or otherwise discharged, recourse could be had to 30% of the share income of the partner in the firm. However, before the firm could be made liable, two conditions must co-exist. The first is, the irrecoverabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 156 of the Act is issued to the firm, after the Income-tax Officer is satisfied that the requirements of section 182(4) of the Act are fulfilled, it would follow that the firm would be an assessee by whom tax is payable. When an assessee denies its liability to be assessed under section 182 (4) of the Act, such a case would fall under section 246 (c) of the Act enabling the firm as an aggrieved assessee denying its liability to be assessed and made liable for payment of tax under section 182(4) of the Act, to prefer an appeal against the order passed by the Income-tax Officer. Incidentally, we may also refer to CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC), where it has been pointed out by the Supreme Court that the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer, we find that it had nowhere been stated that the tax levied on the partner cannot be recovered. In the absence, therefore, of the fulfilment of this important ingredient, the Income-tax Officer could not have proceeded to hold the firm liable for the tax levied on the partner in respect of his share income. We may also point out that the circumstance that there are some difficulties or there is delay in the matter of recovery of the tax from the partner would not justify resort by the Income-tax Officer to section 182(4) of the Act. The retention up to a limit of 30% of the share of each partner in the income of the firm and the statutory imposition of the liability to tax on the firm to the extent of the amount retaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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