R PONNUSWAMI GRAMANI Vs. COLLECTOR OF CHINGLEPUT DISTRICT

JUDGEMENT

(1.) ON 15th August, 1950, Ponnuswami Gramani, the petitioner, entered into a partnership with one Kurshidulla Sahib for carrying on a business in hides and skins. The name of the firm was Ponnuswami Gramani and Kurshidulla and Co., and its place of business was in Periamet, Madras. By an instrument dated 29th January, 1952, the partnership was dissolved with effect from 15th January, 1952. Notice of the dissolution was given to the Registrar of Firms, Madras, and also by advertisement in a Tamil newspaper. By the terms of the instrument of dissolution, Ponnuswami Gramani relinquished all his interests in the partnership in favour of Kurshidulla Sahib who took over all its assets and liabilities. Kurshidulla continued to do business in the same commodities.

(2.) ON 31st March, 1953, that is to say, long after the deed of dissolution had been executed, the Deputy Commercial Tax Officer, Moore Market Division, Madras, assessed the firm of Ponnuswami Gramani and Kurshidulla and Co. to sales tax for the year 1950-51 in a sum of Rs. 2,551-8-5. Similarly on 26th March, 1955, he assessed the firm to sales tax for the year 1951-52 in a sum of Rs. 7,053-11-5. The petitioner represented to the Sales Tax Authorities that in view of the fact that the firm had been dissolved in 1952 sales tax should be assessed on and collected only from Kurshidulla Sahib. His objections however were overruled, and the appeal he preferred to the Special Commercial Tax Officer was dismissed.

(3.) IN Deputy Commissioner of Commercial Taxes v. Bakthavatsalam Naidu (1955] 6 S.T.C. 657), a Bench of the Andhra High Court ruled : "Under the Madras General Sales Tax Act a firm is a 'dealer' and therefore in respect of a transaction done by a firm, which was in existence during the assessment year but was dissolved subsequently, it is the firm that is to be assessed to tax and not any of its partners in their individual capacity." Another decision that was cited before me is that reported as R. D. Fernandes, IN re ([1957] 8 S.T.C. 365). IN that case it appears that a firm dealing in tiles was dissolved in October, 1951. Subsequent to that date the firm was assessed to sales tax and a notice was issued to it to pay the amount. The notice was served on both the partners of the dissolved firm. The tax, not having been paid, one of the partners was prosecuted. He was convicted by the Magistrate and he came up in revision to this Court. The conviction was confirmed and the revision petition dismissed. Ramaswami, J., who dealt with the matter observed, "This State debt will be recoverable from and out of the partnership assets even after dissolution and in the hands of the partners or otherwise." IN W.P. No. 397 of 1954 Rajagopalan, J., went into the matter more fully. The relevant facts there were as follows : Manickam Chettiar and Lakshmayya Ammal were partners of a firm which traded under the name of Starch Manufacturing Co., Salem. The firm was dissolved on 4th August, 1949. Thereafter Manickam Chettiar continued the business. The firm was assessed to sales tax for the year 1948-49. It was assessed to sales tax for that portion of the year 1949-50 during which it was in existence. The amount of the assessment not having been paid, notices of demand were issued to Manickam Chettiar who was described as "Sri P. Manickam Chetty Starch Manufacturing Co., Shevapet, Salem". The notices were served on him. As the amount was not paid the revenue authorities threatened to proceed against the petitioner under the Revenue Recovery Act. He therefore came to this Court and prayed for the issue of an appropriate writ to prohibit the concerned authorities from doing so. IN dismissing the petition, Rajagopalan, J., observed : "It is no doubt true that neither the Act nor the rules framed thereunder make any separate provision for assessing the turnover of the dissolved firm or for the recovery of the taxes due by a dissolve firm, which was a dealer as defined by section 2(b) of the Act up to the date of its dissolution. To that extent it differs from the INcome-tax Act. That however, in my opinion, is not enough to sustain the contention of the learned counsel for the petitioner, that the partners of the dissolved firm are not in any way liable for the sales tax due by the dissolved firm ...... Though there is no specific provision in the Act or the rules thereunder for collection of arrears of tax due from a dissolved firm, the liability of the petitioner as a partner of the dissolved firm to pay whatever was lawfully due by the partnership of which he was a partner can be enforced, if it is established that there was default within the meaning of section 10. The arrears could be recovered from him independent of his possession of any of the assets of the dissolved partnership, as if the arrears of tax constituted an arrear of land revenue."