B. J. Diwan, C.J. - The petitioner herein prays for a with, direction order directing the respondent herein to issue the income-tax clearance certificate under R. 44A of the Income-tax Rules and forward the income-tax clearance certificate to the registering officer concerned.
2. The petitioner before us is a partnership firm and the respondent herein is the Income-tax Officer, B-Ward, Rajshmundry, having jurisdiction over the Krishna district. The petitioner is a registered firm consisting of 15 partners and was carring on business under the name and style of M/s. Sri. Krishna Rice and Oil Mill. Disputes arose between the partners and a general power-of-attorney was executed in favour of one T. Radhakrihna Vittal Rao appointing him as the administrator and investing him with the power to sell some of the machinery and assets of Sri Krishna Rice and Oil Mill and execute a sale deed in favour of the vendee in the name and for and on behalf of Sri Krishna Rice and Oil Mill. The mill was sold by the said general power-of-attorney holder to the Sri Durga Rice and Oil Mill for a consideration of Rs. 2,00,000. The relevant sale deed was executed on November 12, 1972, and a stamp duty of Rs. 19,000 was paid. The document was presented for registration to the Sub-Registrar of Machilipatnam on March 16, 1973, and a further sum of Rs. 1,070 was paid towards registration charges. Under the terms of S. 230A, since the document was required to be registered under the provisions of S. 17 of the Indian Registration Act and since the property sold was valued at more than Rs. 50,000 it could not be registered unless the Income-tax Officer concerned certified that the petitioner had either paid or made satisfactory liabilities under the Income-tax Act and allied Central Fiscal enactments. On May 16, 1973, the petitioner-firm applied in the prescribed form for a certificate under sub-S. (1) of S. 230A to the respondent. It is the petitioners case that there was no existing liability against the petitioner-firm on the date of the application under any one of the aforesaid Acts and it was so stated in column 6 of the application. By his letter dated May 18, 1973, the respondent asked the petitioner to produce the tax clearance certificate in respect of all the partners of the firm and it is the petitioners contention that the tax clearance certificate that has to be furnished in only in respect of the firm as such and not in respect if all the individual partners of the firm. It is in these circumstances that this writ petition has been filed.
3. It is true that in the definition of the word 'person' occuring in sub-S. (31) of S. 2 of the Act, a person includes a firm and for the purpose of assessment, a registered firm is a person on whom assessment can be made, whose profit and gains can be ascertained and who is subject to a special tax as a registered firm. It is, however, equally well-settled that, after the payment of that small amount of tax, the profits and gains of the partnership have to be distributed to each individual partner of the registered firm and these profits and gains are then assessed in the hands of the partners of the firm. Even the business losses have to be distributed among the partners of the firm and the carrying forward of the business losses has to be done in the individual assessments of the partners of the partners of the firm. It is also equally well-settled law that, in India, a partnership firm has to persona in the general law of jurisprudence and it has no corporate personality. Therefore, when some property is owned by a firm in the eye of law, it is owned by a firm in the eye of law, it is owned by all partners of the firm. Therefore, when S. 230A (1) refers to the firm. Therefore, when S. 230A (1) refers to the income-tax clearance certificate in respect of a person whose right, title or interest is being transferred, it could only mean the income-tax clearance certificate in respect of the partners of the firm who jointly own the partnership property that has to be furnished. Since the property jointly belongs to the partners, each individual partner must have a clearance certificate in his favour before the partnership property can be registered. Under these circumstances, the decision of the respondent certificate must be furnished in respect of each of the partners and not merely in respect of the firm as a whole, was correct.
4. This writ petition, therefore, fails and is dismissed. The rule is discharged.
5. We may, however, observe that, in spite of our decision as above, it will be open to the petition-firm to deposit or otherwise satisfy the demand of the income-tax department as regards the liability of one of the partners of the firm, who is in arrears of tax, and once that is done, it will be open to the respondent to issue the necessary tax clearance certificates. There will be no order as to costs.