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Veerappa Ningappa Sanakal of Munavalli and ors. Vs. the Mysore State - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 557 of 1959
Judge
Reported in[1962]13STC796(Kar)
ActsConstitution of India - Articles 226 and 227
AppellantVeerappa Ningappa Sanakal of Munavalli and ors.
RespondentThe Mysore State
Appellant AdvocateR.V. Jahagirdar, Adv.
Respondent AdvocateD.M. Chandrasekhar, Adv.-General
Excerpt:
.....of road, prescribed. proposed fuel station of respondent and existing fuel station of petitioner were on either side of a high way. prohibition of distance between two adjoining stations would not apply. - in my opinion, we should say the same thing about a partnership firm as well. 14. if, as in this case, the partnership firm was in existence during the assessment year and the partners of the firm were therefore clearly liable to pay the sales tax in respect of the turnover of that firm, they cannot repudiate that liability on the ground that at the time the assessment was made the partnership has disappeared by reason of its dissolution......all the assets and liabilities of the firm, there was in effect a transfer of the business by the firm to gomadi and that, therefore, as provided by section 18(1) of the bombay sales tax act, gomadi was the only person from whom the sales tax could be recovered. 5. this contention, in my opinion, has to be negatived for more reasons than one. in the first place, the assessment was made under section 11 of the act upon the firm and not upon gomadi. if, as contended by mr. jahagirdar, the only person upon whom the assessment could have been made was gomadi by reason of the provisions of section 18(1), the partners of the firm or the firm itself should have challenged the correctness of the assessment which was made upon the firm under the provisions of the act which they did not.....
Judgment:
ORDER

Somnath Iyer, J.

1. Three partners, Gomadi, Sanakal and Honnalli, who were members of a partnership firm, were carrying on business under the name and style of 'Rudrappa Sambappa Gomadi.' The first petitioner before us is one of those partners. Petitioners 2 and 3 are the sons of the deceased partner Honnalli. The third partner Gomadi is not a party to this writ petition. It appears some time during the year 1951 or during the year 952 this partnership was dissolved. The question as to from what date the partnership must be deemed to have been dissolved is involved in a second appeal which is pending in this Court. But in the view that we take in this case, the date of dissolution becomes really immaterial.

2. In respect of the assessment year 1950-51 under the provisions of section 11 of the Bombay Sales Tax Act, the turnover of this firm was assessed to sales tax. The assessment was made on 20th November, 1954. It is thus obvious whether the dissolution of the firm took place in 1951 as alleged by the petitioners in this case or whether it took place in the year 1952 as alleged by Gomadi, the assessment was made at a time when the firm has been dissolved.

3. But the assessment was, nevertheless, made upon the firm as if it were still in existence, and after the assessment was made under the provisions of section 12(5) of the Bombay Sales Tax Act, proceedings were commenced for the recovery of the sales tax as if they were arrears of land revenue. We have been informed that in those proceedings the house belonging to Honnalli was sold on 26th June, 1959, and that a land belonging to Sanakal has been brought to sale although the sale has not yet been held. In this writ petition the petitioners challenge the validity of these proceedings which are commenced for the recovery of the sales tax due under the said order of assessment made in November, 1954.

4. The first contention urged by Mr. Jahagirdar is that since after the partnership was dissolved, Gomadi, one of the partners, took all the assets and liabilities of the firm, there was in effect a transfer of the business by the firm to Gomadi and that, therefore, as provided by section 18(1) of the Bombay Sales Tax Act, Gomadi was the only person from whom the sales tax could be recovered.

5. This contention, in my opinion, has to be negatived for more reasons than one. In the first place, the assessment was made under section 11 of the Act upon the firm and not upon Gomadi. If, as contended by Mr. Jahagirdar, the only person upon whom the assessment could have been made was Gomadi by reason of the provisions of section 18(1), the partners of the firm or the firm itself should have challenged the correctness of the assessment which was made upon the firm under the provisions of the Act which they did not admittedly do. The result, therefore, is that the assessment made upon the firm became final and conclusive, making it impossible for any member of that firm to contend that the assessment should have been made only upon Gomadi and not upon the firm.

6. It is no doubt true that section 18(1) of the Act provides that if a business is transferred by a dealer to another person, the sales tax payable under the Act by that dealer in respect of his turnover is payable by the transferee of the business.

7. Now, in this case it is impossible for the petitioners to contend that there was any transfer of the business of a dealer to Gomadi so as to attract the provisions of section 18(1). The dealer in this case was the partnership firm and it is its turnover that was assessed to sales tax. Now, unless it can be said that there was a transfer of the partnership business to Gomadi, it could not be said that there was a transfer of the business of the dealer by the dealer to someone else.

8. Even according to the petitioners' own case, far from there being any transfer of the partnership business by the firm to any one of its partners, the partnership stood dissolved and there was thus no transfer of the business of the partnership firm to Gomadi. All that happened was that Gomadi took over the assets and liabilities of the firm if what the petitioners say is true, and perhaps Gomadi also continued to carry on the business which the partnership was carrying on. But to say that is something different from saying that there was a transfer of the business to Gomadi by the partnership firm which was the dealer in this case.

9. The other reason why, in my opinion, we should say section 18(1) of the Act cannot assist Mr. Jahagirdar's argument is this : Section 5 which is the charging section makes the dealer liable to pay the sales tax on his turnover. Section 18(1), which as I understand it, is supplementary to section 5, directs that if a dealer transfers his business in respect of the turnover relating to the business transferred, the transferee shall pay the tax. But section 18(1) does not supersede section 5, but is only supplementary to it. That being so, all that section 18(1) does is to make the transferee also liable for payment of the sales tax in addition to the transferor-dealer. It does not substitute the liability of the transferee for that of the dealer. The liability is an additional liability imposed upon the transferee, preserving the liability of the dealer which section 5 brings into existence.

10. In my opinion, the fact that there was a dissolution of the partnership business, as contended by the petitioners before us, did not attract the provisions of section 18(1) so as to make Gomadi exclusively liable for payment of the sales tax due by the firm.

11. It was, however, next urged by Mr. Jahagirdar that since in November, 1954, when the assessment was made under the Act there was no partnership firm in existence, no assessment could have been made by the Sales Tax Officer.

12. Now, the answer to this argument is that the partnership firm is not for the purpose of the Bombay Sales Tax Act, a unit upon which an assessment could be made. The partners of a firm, if the firm is the dealer upon which the assessment is made, are no more than a group of persons carrying on the business in a convenient way under the name and style assigned to the partnership firm. The dealer in a case where the turnover is of a partnership firm is really that group of persons each of whom is jointly and severally liable to pay the tax in respect of the turnover of the firm. The Sales Tax Act does not recognise, as it does not in the case of a Hindu joint family, the partnership as a distinct entity for the purposes of assessment, and if under its provisions an assessment is made upon the firm that assessment is no other than an assessment made upon the collective body of persons composed of its partners.

13. In Writ Petition No. 358 of 1959 (Since reported as K. S. Subbarayappa and Sons v. Commercial Tax Officer, Kolar Circle Kolar [1962] 13 S.T.C. 571), this Court pointed out that in the case of a Hindu joint family for the purposes of the Mysore Sales Tax Act, the unit which constitutes the dealer and upon whom an assessment is made is that collection of persons who form the Hindu joint family and who engage themselves in the family business such as the business of buying and selling goods. It was also pointed out that although for the purposes of the Hindu law that collection of persons is a Hindu joint family with peculiar legal incidents, those incidents for the purposes of the Sales Tax Act can have little relevance, and that if persons of whom a Hindu joint family is composed compendiously constitute a dealer for the purpose of the Sales Tax Act, the members of that family are no more than a group or collection of adventurers in trade conveniently calling themselves by a trade name, and if those persons effected a partition as between themselves, to say that that group which really was the dealer ceases to exist by such partition would be to take the argument too far. In my opinion, we should say the same thing about a partnership firm as well.

14. If, as in this case, the partnership firm was in existence during the assessment year and the partners of the firm were therefore clearly liable to pay the sales tax in respect of the turnover of that firm, they cannot repudiate that liability on the ground that at the time the assessment was made the partnership has disappeared by reason of its dissolution.

15. The clear answer to the argument presented by Mr. Jahagirdar is what is contained in section 25 of the Partnership Act which reads :-

'25. Liability of Partner for acts of the firm. - Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.'

16. If in respect of the contractual liability of a firm the partners of the firm are jointly and severally liable, it is clear that in respect of a statutory liability, they are equally liable.

17. In my opinion, this writ petition cannot succeed and must therefore be dismissed and it is so ordered.

18. But, before concluding, I should notice an argument advanced by Mr. Jahagirdar. He has told us that after the presentation of this writ petition a house belonging to Honnalli was sold on 28th June, 1959, on a Sunday. An order was made by this Court on an application presented by the petitioner that that sale should not be confirmed pending disposal of this writ petition. The petitioners, however, have not amended their writ petition so as to include a prayer for the cancellation of that sale. But the fact that no such relief has been played cannot, in my opinion, prevent us from declaring that if the sale has been held on a Sunday in contravention of Land Revenue Code, that sale is not a valid sale. The petitioners assert that the day on which the sale was held was a Sunday and that is what they say in their affidavit. We have, however, no material on which we can come to the conclusion that that allegation is a true allegation. All that we need say, in my opinion, is that if as contended by the petitioner the sale 'was held on a Sunday that sale should be set aside, and that that sale will have no efficacy or effect, and it would be for the Revenue Authorities to proceed to conduct another sale in accordance with law. The Revenue Authorities are directed to act accordingly.

19. In the circumstances, there will be no order as to costs.

Iqbal Hussain, J.

20. I agree.

21. Petition dismissed.


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