INCOME TAX ACT, 1961

Section 194A

Tax deduction at source - Assessee-in-default - Non-deduction of tax at source under section 194A - Demand raised on managing partner

Assessees were accepting loans in form of deposits and paying interest on such borrowings. Even though assessees were required to deduct tax on the interest paid under section 194A, they failed to do so. AO proceeded to assess assessee treating them as assessees-in-default under section 201. Assessee contended that AO failed to fix liability to pay the tax on the correct person. According to assessee, AO ought not to have fixed the liability on the assessee and its partners and thereafter issued demand only against managing partner. Held: It is settled law that a partnership is neither a natural person nor a juristic person. It has no separate existence than its partners. The liability of a partnership firm is liability of its partners. As such, fixing liability of the firm on its partners can never be held to be illegal. In fact, it necessarily has to be fixed on the partners. In the light of the legal nature of a partnership firm, a demand raised on the managing partner can never be visualized as a wrong fixation of liability. It can only be seen as a demand made on the person who is managing the affairs of the firm, for and on behalf of all its partners. Such a demand does not in any way amount to a conclusion that the claim against the other partners has been given up, since liability of the partners is joint and several.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2013-14 to 2016-17

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