Page 90 - MA - May 2017

INDIAN PARTNERSHIP ACT

or against the partners. While the the partnership and against all the Section 188-A with effect from April
firm is incurring a liability it can be partners by following the procedure 1, 1989 to make it explicit what is
assumed that all the partners were prescribed in Order 21 Rule 50 already implicit and removed the
incurring that liability and so the of the Code of Civil Procedure ambiguity as to the liability of the
partners remain liable jointly and notwithstanding Section 49 of the Partner to pay tax on the income of
severally for all the acts of the firm.” Act. the firm in line with the decisions of
In the case of Maharani Therefore, Section 49 is in the courts. Section 188-A of Income
Mandalsa Devi and Ors. v. M. contradiction and repugnant to the Tax Act, 1961 reads as under
Ramnaram Private Ltd.and Ors., principles enunciated by the courts Joint and several liability of
[1965]3SCR421 , while considering as to the concept of Partnership firm partners for tax payable by firm.:
the scope of Order 21 Rule 50, the as defined in Indian Partnership “188A. Every person who
Supreme Court observed as under : Act, 1932. was, during the previous year, a
“A suit by or in the name of a firm The Parliament has recently partner of a firm, and the legal
is really a suit by or in the name of enacted Limited Liability representative of any such person
its partners. The decree passed in Partnership(LLP) Act, 2008 where who is deceased, shall be jointly and
the suit, though in form against the under it is clearly provided that LLP severally liable along with the firm
firm, is in effect a decree against all shall be a body corporate and a legal for the amount of tax, penalty or
the partners. Beyond doubt, in a entity separate from its partners and other sum payable by the firm for
normal case where all the partners the benefits of limited liability have the assessment year to which such
of a firm are capable of being sued been allowed to the Partners under previous year is relevant, and all the
and of being adjudged judgment- Sections 27(3), 27(4) and 28(1) of provisions of this Act, so far as may
debtors, a suit may be filed and a the Act. be, shall apply to the assessment of
decree may be obtained against a Whereas, it is not clear as to the such tax or imposition or levy of
firm under Order XXX of the Code object sought to be achieved by such penalty or other sum.”
of Civil Procedure, and such a continuing Section 49 to be on the Therefore, there is a strong case
decree may be executed against the statute book when the position of for deletion of Section 49 from the
property of the partnership and law is well settled that a Partnership Indian Partnership Act, 1932 to
against all the partners by following firm has no distinct and separate remove the ambiguity, especially,
the procedure of Order 21 Rule 50 legal status from its partners. It has now, a Partner can limit his liability
of the Code of Civil Procedure” . only created unnecessary confusion under Limited Liability Partnership
From the decisions as discussed as to the personal liability of a Act, 2008.
above, it can be safely concluded Partner.
that a decree obtained against It is noteworthy that the
the firm and partners can be Parliament has already amended kshk.hareesh@gmail.com
executed against the property of Income Tax Act and introduced

President and Vice President meeting
Ms. Ebyan Mahamed Salah, Hon’ble
Ambassador of Federal Republic of
Somalia to India

90 The Management Accountant l May 2017 www.icmai.in