Income Tax Act

Official PDF pages 416–420

SOURCE PDF PAGE 416
(4) The provisions of sub-section (3) shall not debar the liquidator from parting
with such assets or properties for the purpose of—
( a )   the payment of the tax payable by the company;
( b )   making any payment to secured creditors whose debts are entitled under
law to priority of payment over debts due to Government on the date of
liquidation; or
( c )   meeting such costs and expenses of the winding up of the company,
as are in the opinion of the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, reasonable.
(5) If the liquidator fails to give the notice as per sub-section (1), or fails to set
aside the amount as required by sub-section (3), or parts with any of the assets of
the company or the properties in his hands in contravention of the provisions of
that sub-section, he shall be personally liable for the payment of the tax which the
company would be liable to pay.
(6) For the purposes of sub-section (5), if the amount of any tax payable by the
company is notified under sub-section (2), the personal liability of the liquidator
under that sub-section shall be to the extent of such amount.
(7) Where there are more liquidators than one, the obligations and liabilities
attached to the liquidator under this section shall attach to all the liquidators jointly
and severally.
(8) The provisions of this section shall have effect irrespective of anything to the
contrary contained in any other law in force, except the provisions of the Insolvency
and Bankruptcy Code, 2016 (31 of 2016).
13.—Private companies
Liability of directors of private company.
323.   (1) Irrespective of anything contained in the Companies Act, 2013 (18
of 2013), where any tax due from—
( a )   a private company in respect of any income of any tax year; or
( b )   any other company in respect of any income of any tax year during which
such other company was a private company,
cannot be recovered, then, every person, who was a director of the private company
at any time during the relevant tax year, shall be jointly and severally liable for the
payment of such tax unless he proves that the non-recovery cannot be attributed
to any gross neglect, misfeasance or breach of duty on his part in relation to the
affairs of the company.
(2) For the purposes of this section, “tax due” includes penalty, interest, fees or any
other sum payable under the Act.

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14.—Assessment of firms
Charge of tax in case of a firm.
324.   In the case of a firm which is assessable as a firm, tax shall be charged on its
total income at the rate as specified in any Central Act for relevant tax year.
Assessment as a firm.
325.   (1) A firm shall be assessed as a firm for the purposes of this Act, if—
( a )   the partnership is evidenced by an instrument; and
( b )   the individual shares of the partners are specified in that instrument.
(2) A certified copy of the instrument of partnership referred to in sub-section (1)
shall accompany the return of income of the firm of the tax year in respect of which
assessment as a firm is first sought.
(3) For the purposes of sub-section (2), the copy of the instrument of partnership
shall be certified in writing by all the partners (not being minors) or, where the
return is made after the dissolution of the firm, by all persons (not being minors),
who were partners in the firm immediately before its dissolution and by the legal
representative of any such partner who is deceased.
(4) Where a firm is assessed as such for any tax year, it shall be assessed in the same
capacity for every subsequent year, if there is no change in the constitution of the
firm or the shares of the partners as evidenced by the instrument of partnership on
the basis of which the assessment as a firm was first sought.
(5) Where any such change had taken place in the tax year, the firm shall furnish
a certified copy of the revised instrument of partnership along with the return of
income for such tax year, and all the provisions of this section shall apply accordingly.
(6) Irrespective of anything contained in any other provision of this Act, where, in
respect of any tax year, there is on the part of a firm any such failure as is mentioned
in section 271,—
( a )   the firm shall be so assessed that no deduction by way of any payment of
interest, salary, bonus, commission or remuneration, by whatever name
called, made by such firm to any partner of such firm shall be allowed
in computing the income chargeable under the head “Profits and gains
of business or profession”; and
( b )   such payment shall not be chargeable to income-tax under section
26(2)( g ).
Assessment when section 325 not complied with.
326.   Irrespective of anything contained in any other provision of this Act, where
a   firm does not comply with the provisions of section 325 for any tax year,—
( a )   no deduction by way of any payment of interest, salary, bonus, commission
or remuneration, by whatever name called, made by such firm to any
partner of such firm shall be allowed in computing its income chargeable
under the head “Profits and gains of business or profession”; and

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( b )   such interest, salary, bonus, commission or remuneration shall not be
chargeable to income-tax under section 26(2)( g )   in the hands of partners
of such firm.
15.—Change in constitution, succession and dissolution
Change in constitution of a firm.
327.   (1) Where at the time of making an assessment under section 270 or 271,
it is found that a change has occurred in the constitution of a firm, the assess -
ment shall be made on the firm as constituted at the time of making the assessment.
(2) For the purposes of this section, there is a change in the constitution of the firm—
( a )   if one or more of the partners cease to be partners or one or more new
partners are admitted, subject to the condition that at least one person
who was partner of the firm before the change continues as partner after
such change; or
( b )   where all the partners continue with a change in their respective shares
or in the shares of some of them.
(3) The provisions of sub-section (2)( a ) shall not apply to a case where the firm is
dissolved on the death of any of its partners.
Succession of one firm by another firm.
328.   Where a firm carrying on a business or profession is succeeded by another
firm, except in a case covered by section 327, separate assessments shall be
made on the predecessor firm and the successor firm as per the provisions of section
313.
Joint and several liability of partners for tax payable by firm.
329.   Every person who was, during the tax year, a partner of a firm, and the legal
representative of any such person who is deceased, shall be jointly and severally
liable along with the firm for the amount of tax, penalty or other sum payable by
the firm for the tax year, and all the provisions of this Act, so far as may be, shall
apply to the assessment of such tax or imposition or levy of such penalty or other
sum.
Firm dissolved or business discontinued.
330.   (1) Where a firm is dissolved or any business or profession carried on by it
has been discontinued, the Assessing Officer shall make an assessment of the
total income of the firm, as if no such dissolution or discontinuance had taken place,
and all the provisions of this Act, including the provisions relating to the levy of a
penalty or any other sum chargeable under any provision of this Act, shall apply,
so far as may be, to such assessment.
(2) Regardless of the generality of sub-section (1), if the Assessing Officer or Joint
Commissioner (Appeals) or Commissioner (Appeals), in the course of any proceed -
ing under this Act in respect of any such firm as referred to in that sub-section, is
satisfied that the firm was guilty of any of the acts specified in Chapter XXI, he may
impose or direct the imposition of a penalty as per the provisions of that Chapter.

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(3) Every person who was at the time of such dissolution or discontinuance a partner
of the firm, and the legal representative of any such person who is deceased, shall be
jointly and severally liable for the amount of tax, penalty or other sum payable, and
all the provisions of this Act, so far as may be, shall apply to any such assessment
or imposition of penalty or other sum.
(4) Where such dissolution or discontinuance takes place after any proceedings in
respect of a tax year have commenced, the proceedings may be continued against
the person referred to in sub-section (3) from the stage at which the proceedings
stood at the time of such dissolution or discontinuance, and all the provisions of
this Act shall, so far as may be, apply accordingly.
(5) The provisions of this section shall not affect the provisions of section 302(4).
16.—Liability of partners of limited liability partnership in liquidation
Liability of partners of limited liability partnership in liquidation.
331.   Irrespective of anything contained in the Limited Liability Partnership
Act, 2008 (6 of 2009), where any tax including penalty, interest, fee or any
other sum payable under the Act is due and cannot be recovered from—
( a )   the limited liability partnership in respect of any income of any tax year;
or
( b )   any other person in respect of any income of any tax year during which
such other person was a limited liability partnership,
then, in such   case, every such person who was a partner of such limited liability
partnership at any time during the relevant tax year, shall be jointly and severally
liable for the payment of such tax due unless he proves that the non-recovery can -
not be attributed to any gross neglect, misfeasance or breach of duty on his part in
relation to the affairs of the limited liability partnership.
B. —Special provisions for registered non-profit organisation
1. —Registration
Application for registration.
332.   (1) The following persons may, for claiming benefits under this Part as a
registered non-profit organisation, make an application for registration in
such form and manner, as may be prescribed, to the Principal Commissioner or
Commissioner:—
( a )   a public trust; or
( b )   a society registered under the Societies Registration Act, 1860 (21 of
1860), or under any law in force in India; or
( c )   a company registered under section 8 of the Companies Act, 2013 (18 of
2013) or the companies registered under section 25 of the Companies
Act, 1956 (1 of 1956) and deemed to have been registered in pursuance
of section 465(2)( g ) of the Companies Act, 2013 (18 of 2013); or

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( d )   a University established by law or any other educational institution
affiliated thereto or recognised by the Government; or
( e )   an institution financed wholly or in part by the Government or a local
authority; or
( f )   any person as referred to in Schedule III (Table: Sl. No. 27) to (Table: Sl.
No. 29)   and (Table: Sl. No. 36)   and in  
64
[ Schedule VII (Table: Sl. Nos. 17
to 19) ]   and (Table: Sl. No. 42); or
( g )   any other person notified by the Board in this behalf.
(2) A person referred to in sub-section (1) shall be eligible for registration, if—
( a )   such person is constituted or registered or incorporated in India for
carrying out one or more charitable purposes, as referred to in section
2( 23 ) or one or more public religious purposes; and
( b )   the properties of such person are held for the benefit of the general public
under an irrevocable trust—
( i )   wholly for charitable or religious purposes in India; or
( ii )   partly for charitable or religious purposes in India, if such person
was constituted or registered or incorporated prior to the com -
mencement of the Income-tax Act, 1961 (43 of 1961).
(3) Every application in respect of the cases specified in column B of the Table
below shall be made to the Principal Commissioner or Commissioner within the time
provided in column C of the said Table, who shall, on receipt of such application,
follow the procedure provided in this section and shall pass an order within the
time specified in column D of the said Table, and registration, if granted, shall be
valid for a period specified in column E thereof.
TABLE
Sl.
No.
Case   Time limit for
furnishing
application
Time limit for
passing order
Validity of
registration
A   B   C   D   E
1.   Where   the   activities
of the applicant have
not commenced and it
has not been registered
under   any   specified
provision at any time
before making the ap -
plication.
At any time during
the tax year begin -
ning from which
registration   is
sought.
One month from
the end of the
month in which
application   is
made.
Three tax years
c o m m e n c i n g
from the tax year
in which such ap -
plication is made.
64.   Substituted for “Schedule VII (Table: Sl. No. 10) to (Table: Sl. No. 19)” by the Finance Act,
2026, w.e.f.   1-4-2026 .