Law:

Section:

Section 237 of the Income-tax Act, 1961 [Corresponding to section 48 of the Indian Income-tax Act, 1922] - Refunds - General - Assessment year 1945-46 - Whether where an unregistered firm is assessed and income-tax is recovered from its partners, even though tax is realised from partners, amounts received from them would have to be treated as amounts realised towards tax payable by firm and not as tax paid by partner or on his behalf or treated as paid on his behalf in excess of amount with which he is properly chargeable under 1922 Act - Held, yes - Whether there being no realisation from partner which was illegal, no refund can, therefore, be claimed by any partner on basis that any tax has been illegally realised from him - Held, yes FACTS The assessee was a partner in an unregistered firm. The income of the firm was assessed and the tax was determined on this income. The amount of tax so determined was recovered from the partners of the firm, including the assessee. The partners of the firm filed an application to the ITO for refund of what, according to them, was tax collected on their behalf from the firm in excess of the tax to which their proportionate shares in the income of the firm would have been liable to be charged, if they had been assessed in their individual capacities. The ITO rejected said claim. On appeal to the Tribunal, it was submitted by the assessee that although for the purposes of the Act, a firm was an assessable entity, it was not a juristic person and that in fact it was the partners whose income was taxed and it was the partners from whom the tax was realised. The Tribunal repelled this contention. On reference : HELD Under the charging section 3, a firm is dealt with as a separate assessable entity and tax can be charged on the income of an unregistered firm as a separate entity. In view of this charging section, when the ITO determines the tax either under section 23(3) or section 23(4), he is required to determine the tax payable by a firm as a separate entity. In some cases, even the general rule has to be departed from where there is a special provision requiring a different method of determination of tax, such as the…

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