Recovery of Firm’s Dues
Introduction
If a firm has outstanding tax dues, these can be recovered from every person who was a partner during the relevant financial year, whether the firm is under liquidation or not.
Liability of Partners
Limited Liability Partnership (LLP) [Section 167C]
- If tax dues cannot be recovered from an LLP, all partners during the relevant year are jointly and severally liable for payment.
- Exception: A partner is not liable if they can prove that the non-recovery was not due to their neglect, misfeasance, or breach of duty.
Tax Due Includes:
- Tax, penalty, interest, or any other sum payable under the Income-tax Act.
Other Cases (Non-LLP Firms) [Section 188A]
- All partners or legal representatives of a deceased partner are jointly and severally liable for the firm’s tax dues.
- The provisions of the Income-tax Act apply for assessment and collection of such tax or penalties.