Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that two separate assessments should be made on the assessee-firm one for the period up to April 9, 1974, and the other for the period from April 10, 1974, to November 13, 1974?

Counsel Appeared

Rawat, for the Revenue : B.L. Nema, for the Assessee

D. OJHA, C. J.:

The Tribunal, Jabalpur Bench, Jabalpur, has referred the following question to this Court for its opinion under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act “).

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that two separate assessments should be made on the assessee-firm one for the period up to April 9, 1974, and the other for the period from April 10, 1974, to November 13, 1974? “

The order of the Tribunal making the reference is dated September 1, 1982. The facts in a nutshell giving rise to the aforesaid question are that there was a partnership having three partners, viz., Bhagchand, Rajkumar and Krantikumar. Besides, Arvindkumar, a minor, was also admitted to the benefits of the partnership. Bhagchand died on April 9, 1974, and a new deed of partnership was executed on April 15, 1974, whereby in place of the deceased, Bhagchand, his widow, Smt. Chandrani Bai, was taken as a partner.

In its appellate order, the Tribunal has upheld the finding of the CIT to the effect that in the absence of any clause or agreement that with the death of a partner, the firm would not be dissolved, the legal position is that in the absence of such contract, the death of a partner results in dissolution by operation of the Partnership Act. It seems, as a consequence of the new partnership coming into being, the assessee filed two returns, one for the period ending April 9, 1974, when Bhagchand died, and the other for the period ending November 13, 1974, and it was in this manner that the question as to whether two assessment orders were necessary to be passed, came up for consideration.

As seen above, the, order of reference made by the Tribunal is dated September 1, 1982. A proviso has since been added in s. 187(2) of the Act by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from April 1, 1975. The proviso is to the effect that nothing contained in cl. (a) shall apply to a case where the firm is dissolved on the death of any of its partners. Clause (a) of sub-s. (2) of s. 187, on the other hand, provides that for the purposes of this section,there is a change in the constitution of the firm if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstance that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change. As a result of the proviso aforesaid being added with retrospective effect from April 1, 1975, the provisions of s. 187(2) of the Act, along with the said proviso, would be applicable to the facts of the instant case, the assessment order in question being of the year 1975-76. As a consequence of the said proviso being added to sub-s. (2) of s. 187 of the Act, it is really s. 188 of the Act which will now apply to the facts and circumstances of the present case. Sec. 188 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. 170.

5. The Tribunal, in its appellate order, has held that in the instant case, two separate assessment orders should be made on the assessee firm-one for the period ending April 9, 1974, and the other ending November 13, 1974. In view of the legal position emerging after the addition of the proviso aforesaid to sub-s. (2) of s. 187 of the Act, we are of the opinion that, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that two separate assessments should be made one for the period up to April 9, 1974, and another for the period from April 10, 1974, to November 13, 1974. In other words, the question referred to above is answered in the affirmative. There shall be no order as to costs.

[Citation : 169 ITR 581]