M/S PRADEEP KHAD BHANDAR MANPUR HARDOI THROUGH ITS PROPRIETO V. COMMISSIONER COMMERCIAL TAX U.P.LUCKNOW

STRE/15/2009

AI Insights

The case involves M/S Pradeep Khad Bhandar, which was assessed for Trade Tax by the assessing officer, treating the business run by three brothers as an 'Association of Persons'. The revisionist challenged the assessment order and subsequent appellate orders, arguing that the liability under the 'Association of Persons' should be joint and several, not solely on the revisionist. The court referenced a judgment by the Commissioner of Trade Tax vs. Laxmi Vanaspati and Oil Company, Varanasi, which clarified the nature of 'Association of Persons'. The court found no infirmity in the assessment and dismissed the revision, allowing the revisionist to recover the tax paid from the other partners.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 735615 (HC-LUCKNOW)
• Appeal Type: Others
• Pronouncement Date: 25-08-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Trade Tax vs. Laxmi Vanaspati and Oil Company, Varanasi [2007 UPTC-1461], G. Murugesan and Brothers v. Commissioner of Income Tax, (1973) 88 I.T.R., M/S Rana and Company, Allahabad v. Commissioner of Sales Tax
• Laws Referred To: U.P. Trade Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: C S C
• Assessee Lawyers: S M K CHOUDHARY; YOGESH SRIVASTAVA
• Keywords: Assessment; Association of Persons; Liability; Trade Tax; Joint and Several
• Section: 1461

Judgement Text

"Neutral Citation No. - 2023:AHC-LKO:58343 Court No. - 17 Case :- SALES/TRADE TAX REVISION No. - 15 of 2009 Revisionist :- M/S Pradeep Khad Bhandar Manpur Hardoi Through Its Proprieto Opposite Party :- Commissioner Commercial T ax U.P .Lucknow Counsel for Revisionist :- S.M.K. Choudhary,Yogesh Chandra Srivastava Counsel for Opposite Party :- C.S.C. Hon'ble Alok Mathur ,J. Heard learned counsel for the parties and perused the record. By means of the present revision the revisionist has assailed the order dated 19.3.2005, passed by Assistant Commissioner, Commercial T ax, Hardoi, order dated 15.10.2007 passed by Joint Commissioner (Appeal)-I, Commercial T ax, Lucknow and order dated 31.12.2008, passed by Commercial T ax T ribunal, Lucknow thereby dismissing the appeal preferred by the revisionist. Facts leading to the present case are that the revisionist namely M/S Pradeep Khad Bhandar has been assessed to trade tax by the assessing officer and the first appeal and second appeal has been rejected and, hence, assailing all the aforesaid orders present revision has been filed. While making the said assessment assessing authority was of the view that the business is being run by three brothers namely Pradeep Kumar, Kamlesh Kumar and Vimlesh Kumar and, therefore, treating them to be association of persons the said assessment order has been passed. The assessment has been made against the firm namely Pradeep Khad Bhandar which has challenged the assessing orders as well as both the appellate orders. It seems that some survey was conducted in the year 1999 on the basis of which it came forth that all the three brothers were conducting the business together and, consequently, initially assessment order was made for the assessment year 1999-2000 holding them to be Association of Persons. Against the said order of assessment an appeal was filed which was allowed by the Joint Commissioner (Appeal) - Ist, Lucknow thereby holding that all the three persons were part of the association of persons and directions were issued to the assessing authority to pass a fresh assessment order considering them to be an association of persons and issue them individual notices before finalizing the said assessment. In pursuance to the said notice and after considering the response of all the three brothers, again a fresh assessment order was passed on 19.3.2005 treating them to be association of persons and the nomenclature of association of persons was namely \"S/Sh. Pradeep Khad Bhandar, Manpur Hardoi\" and Pradeep Kumar was shown to be the partner in the said firm. Against the order dated 19.3.2005 an appeal was preferred by the revisionist before Joint Commissioner (Appeal)-I, Trade T ax, Lucknow who has rejected the appeal vide its order dated 15.10.2007. Against the said rejection order second appeal was filed by the revisionist before Commercial T ax Tribunal, Lucknow which was also rejected vide order dated 31.12.2008. Even in the said order the T ribunal found no infirmity in the assessment of revisionist as association of persons taking into account the survey report and the material which is on record which clearly establishes that all the three brothers were working together for a common business and even the papers collected during the said survey indicated their collective working. The only grievance raised by the revisionist in present revision is that even if the assessment has been made treating the business to be under head of association of persons only the revisionist has been made liable for payment of the T rade T ax while the liability under the head of association of persons would be joint and several of all the partners/ members of the said firm. In support of his submissions learned counsel for the petitioner has relied upon the judgment of the Commissioner of Trade Tax vs. Laxmi Vanaspati and Oil Company, Varanasi [2007 UPTC-1461], relevant portion of which is being reproduced as under :- \"6. Association of persons\" has not been defined under U.P. Trade Tax Act. However, the said phrase has been the subject matter of consideration by the Apex Court in the case of G. Murugesan and Brothers v. Commissioner of Income Tax, (1973) 88 I.T.R. has held that expression 'association of persons' is not a term of art. It has laid down as follows : \"For forming an 'association of persons', the members of the association must join together for the purpose of producing an income. An 'association of persons' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, volition on the part of the members of the association is an essential ingredient. It is true that even a minor can join an 'association of persons' if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an 'association of persons' from the mere fact that they jointly own one or more shares and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an 'association of persons'. 7. Following the aforesaid decision of the Apex Court, this Court in the case of M /S Rana and Company, Allahabad v. Commissioner of Sales Tax (supra), has held that for forming 'association of persons' the members of the association must join together for the purpose of producing an income. An \"Association of persons\" can be formed only when two or more individuals voluntarily combine together for a certain purpose. In other words, there should be sharing of two or more individuals to achieve a particular object with reference to sharing of profit and loss.\" It is noticed that there is no dispute in the present case with regard to the assessment order but the grievance pertains only that the said Association of Persons has been described as S/Sh Pradeep Khad Bhandar and, accordingly, the liability to pay the tax for Association of Persons would fall directly on the revisionist. It is stated that the other two partners are also liable to pay the Trade T ax as per the assessment order. Considering the aforesaid submissions, it is noticed that both the authorities below have correctly recorded a finding that the revisionist can be assessed as an Association of Persons. In the present case it is noticed that the said Association of Person is being run by the three brothers while the firm is being run by only one brother, i.e., revisionist has been made liable to pay the amount of T rade T ax and, accordingly, even if the revisionist pays the tax as assessed, he can always recover it from other members of the Association of Person as the liability is joint and several but merely on this score the validity of the impugned orders cannot be doubted. Accordingly, this Court does not find any infirmity with the assessing order or with order passed by the Commercial T ax Tribunal and it is left open to the petitioner to recover the outstanding amount of the tax from the other members of the Association of Person in accordance with law. Subject to the aforesaid observations, the revision is dismissed. Order Date :- 25.8.2023 mks Digitally signed by :- MANISH SAXENA High Court of Judicature at Allahabad, Lucknow Bench "