COMMISSIONER OF INCOME TAX Vs. PALANIAPPA TRANSPORTS

JUDGEMENT

(1.) IN T.C. No. 191 of 1976, which relates to the assessment year 1966-67, the following question has been referred to this court:

(2.) IN T.C. No. 400 of 1976, which relates to the assessment year 1965-66, the question referred runs as follows:

(3.) SECTION 183(b) provides for cases where the partners of the firm having substantial income may seek to avoid tax liability by not filing an application for registration. If they filed an application for registration of the firm and if the firm was assessed as a registered firm, then, as seen already, they are liable to pay tax on the total income including the apportioned income earned by the firm. This would attract tax at higher rate. In order, to plug this kind of loophole by the firm not applying for registration, SECTION 183 enables the ITO to treat the firm as a registered firm even if the firm had not applied for registration,