Skip to content


Bankatlal Badruka and ors. Vs. the State of Bombay and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Application No. 1350 of 1959 with Civil Application No. 285 of 1960
Judge
Reported in[1961]12STC405(Bom)
ActsHyderabad General Sales Tax Act - Sections 12 and 12(3); Uttar Pradesh Sales Tax Act, 1948; Central Provinces and Berar Sales Tax Act; Mysore Sales Tax Rules - Rule 37; Madras General Sales Tax Act - Sections 2
AppellantBankatlal Badruka and ors.
RespondentThe State of Bombay and ors.
Appellant AdvocateS.P. Mehta and ;Y.P. Trivedi, Advs.
Respondent AdvocateG.N. Joshi, Adv., Instructed by Messrs Little & Co., Attorneys
Excerpt:
- - the petitioners did not submit any return in respect of the period 27th october, 1954, to 14th november, 1955. the sales tax officer, therefore, decided to assess the firm to the best of his judgment under section 12(3) of the act. it was held that in the absence of the compliance with rule 37 and in the absence of proper proof of the alleged dissolution prior to the date of assessment, the assessee-firm could not complain that the order of assessment was invalid because it was made after the dissolution of the assessee-firm......thereafter the petitioners filed the present application. 2. the petitioners' case is that their firm was dissolved on 2nd november, 1956. mr. mehta, who appears on their behalf, has argued that under the hyderabad sales tax act, the firm is a distinct legal entity, which can be assessed to tax and that as the firm is a distinct legal entity, which can be assessed to tax and that as the firm had ceased to exist when it was dissolved on 2nd november, 1956, the sales tax officer was not competent to assess the tax due from the firm. he has relied on the decision of the allahabad high court in jagat behari tandon v. sales tax officer [1957] 8 s.t.c. 459, in which it was held the an assessment order cannot be made under the uttar pradesh sales tax act, 1948, on a firm after it is dissolved.....
Judgment:

Chainani, C.J.

1. The petitioners were partners of a firm, which used to carry on business at Parbhani and Adilabad. The firm was registered as a dealer under the Hyderabad General Sales Tax Act. Under section 12 of the Act, every dealer was required to submit a return relating to his turnover. The petitioners did not submit any return in respect of the period 27th October, 1954, to 14th November, 1955. The Sales Tax Officer, therefore, decided to assess the firm to the best of his judgment under section 12(3) of the Act. Before doing so he issued a notice to the petitions' firm. The first hearing before the Sales Tax Officer was on 2nd February, 1956. The petitioners did not appear before him. The case was then adjourned 13 times, but the petitioners did not appear. The Sales Tax Officer then estimated the turnover of the petitioners and made an order for assessment assessing the firm to tax of about Rs. 1,56,000. This order was made on 3rd January, 1957. The petitioners appealed against this order to the Deputy Commissioner of Sales Tax. He confirmed the order of the petitioners' assessment and dismissed the appeal. The petitioner then approached the Sales Tax Tribunal, but the Tribunal also dismissed their appeal. Thereafter the petitioners filed the present application.

2. The petitioners' case is that their firm was dissolved on 2nd November, 1956. Mr. Mehta, who appears on their behalf, has argued that under the Hyderabad Sales Tax Act, the firm is a distinct legal entity, which can be assessed to tax and that as the firm is a distinct legal entity, which can be assessed to tax and that as the firm had ceased to exist when it was dissolved on 2nd November, 1956, the Sales Tax Officer was not competent to assess the tax due from the firm. He has relied on the decision of the Allahabad High Court in Jagat Behari Tandon v. Sales Tax Officer [1957] 8 S.T.C. 459, in which it was held the an assessment order cannot be made under the Uttar Pradesh Sales Tax Act, 1948, on a firm after it is dissolved and has discontinued business on the ground that the firm as a unit of assessment has ceased to exist. This case was cited before the Madhya Pradesh High Court in Lalji v. Assistant Commissioner, Sales Tax, Raipur [1958] 9 S.T.C. 571. Under the Central Provinces and Berar Sales Tax Act, a registered dealer was required to intimate any change in the name or nature of the business to the Sales Tax Authorities. No intimation of the dissolution of the firm was, however, sent to him. It was held that the firm continued to be liable to assessment, so long as any change effected in the name or nature of the business has not been intimated to the prescribed authority under the Act. A similar view was taken by the Mysore High Court in State of Mysore v. Saravathulla & Co. [1958] 9 S.T.C. 593 Rule 37 of the Mysore Sales Tax Rules provides that if a partnership is dissolved every person who was a partner shall send a report of the dissolution to the assessing authority within 30 days of such dissolution. It was held that in the absence of the compliance with rule 37 and in the absence of proper proof of the alleged dissolution prior to the date of assessment, the assessee-firm could not complain that the order of assessment was invalid because it was made after the dissolution of the assessee-firm. The decision of the Allahabad High Court was also not followed by the Madras High Court in Ponnuswami Gramani v. Collector of Chingleput District [1960] 11 S.T.C. 80. It was held in that case that although the Madras General Sales Tax Act and the rules framed thereunder make no separate provision for assessing the turnover of, or for the recovery of taxes due by, a dissolved firm, the firm being a dealer as defined in section 2(b) up to the date of its dissolution, could be assessed to sales tax even after its dissolution and the tax could be recovered from the partners of the dissolved firm.

3. With respect, we agree with the view taken by the Madras High Court and the Madhya Pradesh High Court. As pointed out by the Supreme Court in Commissioner of Income-tax v. A. W. Figgies & Co. : [1953]24ITR405(SC) , firm has no legal existence apart from its partners and it is merely a compendious came to describe its partners. The petitioners' firm has been assessed to sales tax for the period during which it carried on business before it was dissolved. If as liable to pay the tax in respect of the business carried on by it. In fact the assessment proceeding had also started long before the firm was dissolved. It is, therefore, difficult to see how the liability of the firm to pay the tax came to an end on its dissolution. Under the ordinary law, the debts of firm can be recovered from its assets, even after the firm has been dissolved. Consequently, we are unable to accept the argument that the jurisdiction of the Sales Tax Authorities to assess the firm ceased as soon as the firm was dissolved. I may also refer to rule 35 of the Hyderabad General Sales Tax Rules, which provides that if a partnership is dissolved, every person who was a partner shall send a report of the dissolution to the licensing, registering and assessing authority within thirty days of such dissolution. It is admitted that the petitioners had not sent any intimation about the dissolution of the firm to the Sales Tax Officer. At the time when the firm is said to have been dissolved, the assessment proceedings against the firm were going on before the Sales Tax Officer. He did not receive any intimation from the petitioners about the dissolution of the firm. He cannot, therefore, be said to have acted wrongly or without jurisdiction in continuing the assessment proceedings and passing final orders thereon.

4. In our opinion, therefore, there is no force in the argument, which has been advanced by Mr. Mehta, that the petitioners' firm could not be assessed to sales tax, to which it had become liable, after the firm was dissolved. In this view it is not necessary to consider the other objection which has been raised to the maintainability of the petition and that is that as the petition had been made about four months after the petitioners had received intimation of the order of the Sales Tax Tribunal, it cannot be entertained.

5. The rule will, therefore, be discharged. The petitioners should pay Rs. 250 to the opponents for their costs.

6. Rule discharged.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //