High Court Of Rajasthan
CIT vs. Assumal Veerumal
Sections 187, 188
Asst. Year 1977-78
J.S. Verma, C.J. & Milap Chandra, J.
D.B. IT Ref. No. 34 of 1982
27th July, 1987
Counsel Appeared
B.R. Arora, for the Revenue
BY THE COURT :
This reference is made under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ” the Act”), at the instance of the Revenue for answering the following question of law, namely:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no error in the order of the ITO as the firm stood dissolved on the death of Shri Assumal, partner, on August 11, 1975, and, therefore, two separate assessments should have been made for the two periods, meaning thereby, up to September 11, 1975, and for the period from September 12, 1975, to April 30, 1976 ?”
2. The assessee-firm consisted initially of four partners, namely, Assumal, Virumal, Tillomal and Lachmandass, having equal shares. On the death of Assumal on September 11, 1975, the remaining three partners constituted a firm with a newly admitted partner, Manohar Lal, vide partnership deed dated September 21, 1975. A minor was also admitted to the benefits of the partnership. The assessee filed two separate returns, one for the period ending September 11, 1975, and the other for the period thereafter for the relevant asst. yr. 1977-78. The ITO was of the view that two separate assessments for these two periods were required to be made. The CIT set aside the ITO’s order in exercise of his jurisdiction under s. 263 of the Act taking the view that this was a case of a mere change in the constitution of the firm on the death of a partner, so that only one assessment for the entire assessment year had to be made. The Tribunal thereafter took the view that two assessments had been rightly made by the ITO for the two periods prior to and subsequent to the death of one of the partners, Assumal, on September 11, 1975, since the the firm stood dissolved on his death. Aggrieved by the view taken by the Tribunal, the Revenue sought a reference which had been made for answering the abovequoted question of law.
3. Admittedly, the present case is governed by the amended s. 187 of the IT Act, 1961, as it stands after the insertion of the proviso in sub-s. (2) of s. 187 retrospectively w.e.f. April 1, 1975, by the Taxation Laws (Amendment) Act, 1984, which reads as under : ” Provided that nothing contained in cl. (a) shall apply to a case where the firm is dissolved on the death of any of its partners. “
4. After the insertion of this proviso in sub-s. (2) of s. 187, it is beyond controversy that it cannot be treated as a case of a change in the constitution of the firm as defined in s. 187(2) of the Act, since the firm stood dissolved on the death of one of the partners under the general law of partnership in the absence of a contract to the contrary. Accordingly, it is a case of succession governed by s. 188 of the Act on account of the fact that the applicability of s. 187 is excluded by virtue of the proviso to sub-s. (2) of s. 187 [see CIT vs. Kheta Sons & Co. (1987) 59 CTR (SC) 218 : (1986) 162 ITR 833 (MP)]. The Tribunal’s view was, therefore, justified.
5. Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified.
No costs.
[Citation : 170 ITR 489]
