Skip to content

CA Final · Indirect Tax Laws · Liability to Pay in Certain Cases

M/s Sharma & Verma, a partnership firm, was dissolved on 31 March. Its partners were Anil, Bhavna and Chetan. In July, the proper officer determined tax and interest of Rs 3,50,000 for supplies made by the firm up to the date of dissolution. Which statement is correct?

All three partners are jointly and severally liable for the Rs 3,50,000. The Act makes every person who was a partner liable for dues up to dissolution, whether determined before or after dissolution. Liability is not limited to a share or to the managing partner.

  1. AOnly the partner who managed GST compliance is liable for the amount
  2. BEach partner is liable only for a one-third share of the amount
  3. CThe amount cannot be recovered because it was determined after dissolution
  4. DEvery person who was a partner is jointly and severally liable for the amount, even though it was determined after dissolutionCorrect

Explanation

On dissolution of a firm, every person who was a partner is jointly and severally liable for tax, interest or penalty due from the firm up to the time of dissolution. This holds whether the amount was determined before or after dissolution. A proportionate-share liability is not what the Act provides.

Did you get it right without looking?

One question tells you little. A timed set on Liability to Pay in Certain Cases shows your real accuracy, how long you take and where you lose marks.

Practise Liability to Pay in Certain CasesFree diagnostic mock

More Liability to Pay in Certain Cases questions