Delhi High Court Refuses Refund Of ₹1 Crore Paid By Firm Towards Partner's Income Tax Dues, Calls It Inter-Se Dispute

The Delhi High Court has refused to direct a refund of ₹1 crore paid by a partnership firm towards the individual income tax dues of its partner, holding that the amount was voluntarily tendered and that the dispute essentially concerned an inter-se dispute between partners.

The Division Bench of Justices Dinesh Mehta and Aditi Choudhary dismissed a writ petition filed by Surender Gupta, who sought refund of ₹1 crore along with interest.

The amount had been paid through two fixed deposits of ₹40 lakh each and a cheque of ₹20 lakh towards outstanding tax demands pertaining to assessment years 2011-12 and 2016-17.

Petitioner contended that the tax demand was against Surender Gupta in his individual capacity, who had a separate Permanent Account Number (PAN), whereas the amount was recovered from the partnership firm, which was a separate assessee having a different PAN.

The background of the case was that a liquor shop was initially being run as a proprietorship concern in the name of M/s Surender Gupta. On June 8, 2017, Mahavir Mittal and Anu Mittal entered the business and a partnership deed was executed. Surender Gupta retained a 1% share, while the remaining 99% share was jointly held by Mahavir Mittal and Anu Mittal.

Petitioner argued that the firm had been compelled to hand over the two FDRs and cheque after the Income Tax Department issued a notice to the bank.

The Department however maintained that the partners had handed over the instruments voluntarily and that there was no coercive recovery.

The Court found that the two FDRs and cheque had been voluntarily tendered by the petitioner on June 8, 2017.

“It might have happened that since the bank account was attached, the petitioner paid the amount but it cannot be said that the same was recovered forcefully,” it observed at the outset.

The Court further noted that there was nothing on record to establish that the Income Tax Department had been informed about the change in the constitution of the business from a proprietorship to a partnership firm.

It added that if the demand did not belong to the firm, there was no compulsion for the firm to deposit the amount.

The Court further held that if the firm had paid the amount towards a demand belonging to one of its partners, the matter was essentially an “inter-se dispute between the partners, who were family members.”

Holding that a Writ Court is not meant for redressal of individual grievances or disputes between partners, the Court dismissed the writ petition.

For Petitioner: Advocates Apoorv Singhal, Tanuj Agarwal, Amit Kundu,Ashfaq, 

For Respondents: Indruj Singh Rai, SSC withSanjeev Menon, Advocates Rahul Singh and  Priya Sarkar, JSCs along with Gaurav Kumar and Prateek Bhati