Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that two separate assessments should be made ignoring the provisions of s. 187(2)(a) of the IT. Act, 1961 ?

BY THE COURT

At the instance of the Revenue, the Tribunal has referred the following question to this Court for its opinion:

“Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that two separate assessments should be made ignoring the provisions of s. 187(2)(a) of the IT. Act, 1961 ?”

The facts as stated in the statement of the case and as gleaned from the order of the Tribunal are that the assessee- firm was constituted under a partnership deed dt. 1st April, 1968, with five major partners and two minors, who were admitted to the benefits of the partnership. In December, 1973, one of the minors, namely, Rakesh Mishra, attained majority and he opted to become a full-fledged partner in the firm. That necessitated a fresh partnership deed which was executed on 1st April, 1974, by the five existing partners and Rakesh Mishra, who attained majority in December, 1973. Sri Rajiv Mishra, another minor, who was admitted to the benefits of the partnership, opted out of the partnership. The question arose whether the partnership firm which existed from before 1st April, 1974, stood dissolved or continued after being reconstituted.

3. Sec. 187, sub-s. (2), of the IT Act, 1961, provides as follows: “For the purposes of this section, there is a change in the constitution of the firm (a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change; or (b) where all the partners continue with a change in their respective shares or in the shares of some of them.”

From the facts as reproduced above, it is clear that the five major partners continued in the firm, which was reconstituted on 1st April, 1974, and, therefore, it is a case of merely reconstitution of the firm and not of dissolution as envisaged by s. 188 of the Act. No authority need be cited in support of this proposition but if at all one is needed, we may rely on the case of CIT vs. Ramesh Biscuit Factory (1994) 205 ITR 205 (All), in which it has been held that in the cases falling under s. 187, a single assessment is required to be made for the purposes of the income for the entire previous year, clubbing the income of both pre and post-change periods at one place.

For the reasons, we answer the aforementioned question in the negative, that is, in favour of the Revenue and against the assessee.

[Citation : 224 ITR 713]