CHAPTER XVI — SPECIAL PROVISIONS APPLICABLE TO FIRMS
CHAPTER XVI — SPECIAL PROVISIONS APPLICABLE TO FIRMS
Section 183 — Assessment of unregistered firms (Omitted)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Omitted by the Finance Act, 1992, w.e.f. 1 April 1993. Spent for assessment year 1992-93 and earlier (now read with section 189A).
Finance Act, 2026: No change.
Successor (ITA 2025): No corresponding provision — the unregistered-firm category does not exist under the new scheme.
A. SECTION COMMENTARY
1. What the section did
Section 183 dealt with the firm that had not obtained registration — the "unregistered firm". Such a firm was itself assessed and charged to tax on its total income at the rates applicable to it; the partners were ordinarily not separately taxed on their shares (to avoid double taxation), although the Income-tax Officer was empowered, where it was more beneficial to the revenue, to tax the partners individually instead of the firm. The unregistered firm thus bore the incidence of tax as a unit, in contrast to the registered firm under section 182.
2. The Officer's option under the old law
A recurring feature of the old scheme was the Officer's option, in the case of an unregistered firm (and an association of persons), to assess either the firm/association as a unit or the members on their shares — but not both. This option was a creature of the 1922 Act and of the old Chapter; it does not survive under the present scheme, where the firm is invariably the taxable entity and the partner's share is exempt under section 10(2A). The leading statement of the old option is CIT v. Murlidhar Jhawar & Purna Ginning & Pressing Factory (discussed under section 189), with the important caveat that, for the 1961 Act, the option was later held not to exist (ITO v. Ch. Atchaiah).
Holding: Under the Indian Income-tax Act, 1922, where an unregistered firm (or association) earned income, the Income-tax Officer had an option to assess and tax either the firm/association as a unit or the individual partners/members on their shares, but having once exercised the option in one way he could not thereafter assess the same income in the other way.
Relevance: Explains how section 183 worked for unregistered firms in the pre-1993 (and pre-1961) era.
Caveat: For the Income-tax Act, 1961 this option was held not to exist — the correct person must be taxed — in ITO v. Ch. Atchaiah (1996) 218 ITR 239 (SC). The Murlidhar Jhawar option is therefore confined to the 1922-Act/old-scheme setting.
Status / candour: Old-regime authority, retained only for the historical operation preserved by section 189A.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (local Act print, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; no statutory word has been altered. The new scheme of firm taxation (firm as a separate taxable entity, abolition of registration) operates from assessment year 1993-94; sections 182, 183 and 186 stand omitted by the Finance Act, 1992, w.e.f. 1-4-1993. The Finance Act, 2026 makes no amendment to any section of Chapter XVI. Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed on its own terms, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XVI — SPECIAL PROVISIONS APPLICABLE TO FIRMS
Section 183 — Assessment of unregistered firms (Omitted)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Omitted by the Finance Act, 1992, w.e.f. 1 April 1993. Spent for assessment year 1992-93 and earlier (now read with section 189A).
Finance Act, 2026: No change.
Successor (ITA 2025): No corresponding provision — the unregistered-firm category does not exist under the new scheme.
A. SECTION COMMENTARY
1. What the section did
Section 183 dealt with the firm that had not obtained registration — the "unregistered firm". Such a firm was itself assessed and charged to tax on its total income at the rates applicable to it; the partners were ordinarily not separately taxed on their shares (to avoid double taxation), although the Income-tax Officer was empowered, where it was more beneficial to the revenue, to tax the partners individually instead of the firm. The unregistered firm thus bore the incidence of tax as a unit, in contrast to the registered firm under section 182.
2. The Officer's option under the old law
A recurring feature of the old scheme was the Officer's option, in the case of an unregistered firm (and an association of persons), to assess either the firm/association as a unit or the members on their shares — but not both. This option was a creature of the 1922 Act and of the old Chapter; it does not survive under the present scheme, where the firm is invariably the taxable entity and the partner's share is exempt under section 10(2A). The leading statement of the old option is CIT v. Murlidhar Jhawar & Purna Ginning & Pressing Factory (discussed under section 189), with the important caveat that, for the 1961 Act, the option was later held not to exist (ITO v. Ch. Atchaiah).
3. Present relevance
Like section 182, section 183 survives only through section 189A for assessment year 1992-93 and earlier. It is otherwise spent.
B. STATUTORY POSITION (verbatim text)
The Act now carries only the omission notice for this section:
183. [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
Editorial note: Only the omission marker appears in the current Act; the pre-omission text governs pre-1993 years through section 189A.
C. AUTHORITIES
Omitted section; no current jurisprudence. The note below records the old-regime option for unregistered firms, relevant only for past years.
Cluster 1 — The old assess-firm-or-partners option (historical)
CIT v. Murlidhar Jhawar & Purna Ginning & Pressing Factory (1966) 60 ITR 95 (SC) — old-regime option
Holding: Under the Indian Income-tax Act, 1922, where an unregistered firm (or association) earned income, the Income-tax Officer had an option to assess and tax either the firm/association as a unit or the individual partners/members on their shares, but having once exercised the option in one way he could not thereafter assess the same income in the other way.
Relevance: Explains how section 183 worked for unregistered firms in the pre-1993 (and pre-1961) era.
Caveat: For the Income-tax Act, 1961 this option was held not to exist — the correct person must be taxed — in ITO v. Ch. Atchaiah (1996) 218 ITR 239 (SC). The Murlidhar Jhawar option is therefore confined to the 1922-Act/old-scheme setting.
Status / candour: Old-regime authority, retained only for the historical operation preserved by section 189A.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (local Act print, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; no statutory word has been altered. The new scheme of firm taxation (firm as a separate taxable entity, abolition of registration) operates from assessment year 1993-94; sections 182, 183 and 186 stand omitted by the Finance Act, 1992, w.e.f. 1-4-1993. The Finance Act, 2026 makes no amendment to any section of Chapter XVI. Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed on its own terms, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.