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Sri Krishna Rice and Oil Mill Vs. Income-tax Officer, B-ward - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 4098 of 1975
Judge
Reported in[1977]106ITR330(AP)
ActsIncome Tax Act, 1961 - Sections 2(31) and 230A
AppellantSri Krishna Rice and Oil Mill
Respondentincome-tax Officer, B-ward
Appellant AdvocateJ. Eswara Prasad, Adv.
Respondent AdvocateK. Krishna Rao and ;P. Rama Rao, Advs.
Excerpt:
direct taxation - clearance certificate - sections 2(31) and 230 a of income tax act, 1961 - can income-tax officer refuse clearance certificate to firm if arrears of tax is due by one of partners in his individual capacity - partnership firm has no persona in general law of jurisprudence - firm has no corporate personality - each individual partner must have clearance certificate in his favour before partnership property can be registered - writ petition dismissed. - .....to the authorities in his individual capacity, the income-tax officer is incorrect in refusing to grant a certificate to the firm for the sale of the property belonging to the firm. what mr. eswara prasad contends is that the firm wants to sell its own property in which one partner, who is in arrears of tax, has got a certain fixed share while the rest of the property belongs to the firm. could the income-tax officer, in such a case, refuse to give a clearance certificate on the ground that the arrears of tax due by one of the partners in the firm in his individual capacity have to be paid.3. mr. krishna rao, appearing on behalf of the standing counsel for the income-tax department, contends that having regard to the provisions of section 230a of the income-tax act, it is the 'person'.....
Judgment:

Muktadar, J.

1. The petitioner is a firm consisting of -fifteen partners,carrying on the business of rice milling operations. The firm, with a view toobtain an income-tax clearance certificate for purposes of sale of the propertybelonging to the firm, presented an application before the Income-tax Officerfor the grant of a clearance certificate. It is not in dispute that there are noarrears of tax due by the firm; nor is it in dispute that of the fifteenpartners, fourteen partners are also not in arrears but one of the partnersin the firm is in arrears to the wealth-tax authorities. The Income-taxOfficer refused to grant the certificate on the ground that the arrears of this particular partner have to be paid in full or satisfactory provision has to be made for payment of existing liabilities before the clearance certificate could be granted. Hence, this writ petition.

2. The contention of Mr. Eswara Prasad is that when the firm is not due any tax to the authorities and only a partner is due wealth-tax to the authorities in his individual capacity, the Income-tax Officer is incorrect in refusing to grant a certificate to the firm for the sale of the property belonging to the firm. What Mr. Eswara Prasad contends is that the firm wants to sell its own property in which one partner, who is in arrears of tax, has got a certain fixed share while the rest of the property belongs to the firm. Could the Income-tax Officer, in such a case, refuse to give a clearance certificate on the ground that the arrears of tax due by one of the partners in the firm in his individual capacity have to be paid.

3. Mr. Krishna Rao, appearing on behalf of the standing counsel for the income-tax department, contends that having regard to the provisions of Section 230A of the Income-tax Act, it is the 'person' to whom a clearance certificate is given and unless and until that person either pays or makes satisfactory provision for payment of all existing liabilities under the Income-tax Act, the Income-tax Officer is empowered to refuse to grant a certificate under Section 230A. The partner, who is in wealth-tax arrears, will also have to execute the sale deed along with the other partners, in which case the income-tax authorities are justified in refusing to grant a certificate under Section 230A, unless that particular person either pays the arrears or makes satisfactory provision for payment of all existing liabilities.

4. It is true that for liabilities against the firm, any individual partner in the firm could be proceeded against for the entire liability as the liability is not a limited liability. But could it be said that for the individual liability of a partner, the authorities or any creditor could proceed against the entire assets of the firm when the assets of the defaulting partner have been fixed according to the partnership deed.

5. Having regard to the respective contentions advanced by the learned advocates, I am of the opinion that this is a matter of importance and ought to be decided by a Bench. The office is directed to place the papers before my Lord the Chief Justice for the formation of a Bench.


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