High Court Of Allahabad
CIT vs. S.G. Teja Shah Chiranjit Lal & Co.
Section 187, 188
Asst. Year 1977-78
Om Prakash & B.K. Sharma, JJ.
R.A. No. 264 of 1980 in I.T.A. No. 1004 of 1978-79
11th December, 1996
Counsel Appeared
Ashok Kumar, for the Applicant
BY THE COURT
At the instance of the Revenue, the Tribunal, Delhi Bench “B”, Delhi, referred the following question for the opinion of this Court: “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the income of the two periods could not be clubbed ?”
The reference relates to the asst. yr. 1977-78. A partnership firm was originally constituted by four partners; of them, one of the partners, namely, Shankar Dass, died on 16th Sept., 1976. Thereafter, a new firm was constituted by inducting Smt. Seelawati as a partner in place of the deceased partner along with the remaining existing partners. All these facts have been stated in the statement of the case.
The question, therefore, arose whether on the death of Shankar Dass, the predecessor firm stood dissolved or that firm continued with a changed constitution.
Sri Ashok Kumar, appearing for the Revenue, clearly states at the Bar that there was no clause in the partnership deed containing an agreement to the contrary that the partnership firm will not dissolve despite the death of a partner. Sec. 188 of the IT Act, 1961, provides that where a firm carrying on a business or profession is succeeded by another firm, and the case is not one covered by s. 187, separate assessments shall be made on the predecessor firm and the successor firm in accordance with the provisions of s. 188. One of the partners having died on 16th Sept., 1976, and there being no agreement to the contrary in the partnership deed that the partnership firm will not dissolve despite the death of a partner, we hold that the predecessor firm stood dissolved on the death of Shankar Dass and a new firm came into being which was constituted by the remaining partners and Smt. Seelawati, a newly introduced partner. It is a case of succession falling under s. 188 of the IT Act and not a case of change in the constitution of the firm, as envisaged in s. 187.
4. We, therefore, agree with the view taken by the Tribunal that the income of the two periods could not be clubbed.
For the reasons the aforementioned question referred to this Court is answered in the affirmative, i.e., against the Revenue and in favour of the assessee.
[Citation : 224 ITR 267]
