PETITIONER:
WAJID ALI ABID ALI, ETC.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, LUCKNOW, ETC.
DATE OF JUDGMENT10/11/1987
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
RAY, B.C. (J)
CITATION:
1987 AIR 2074 1987 SCR (3)1049
1987 SCC Supl. 329 JT 1987 (3) 370
1987 SCALE (2)351
ACT:
Income Tax Act, 1961-Effect of death of one of the
partners of a registered firm during the assessment year on
the continued benefit of registration under section 184(7)
thereof-Whether a fresh application for registration with
partnership deed embodying change in constitution of firm,
required.
HEADNOTE:
%
Two appeals were filed before this Court one (Civil
Appeal No. 1792 (NT) of 1974) by the assessee from the
Allahabad High Court, and the second (Civil Appeal No. 609
(NT) of 1975) by certificate, at the instance of the
revenue, from the Gujarat High Court. Both the appeals dealt
with a common situation, namely, the position of the
registered firm during the assessment year if one of the
Partners died or retired.
In the assessee's case above-mentioned, the assessee
was a partnership firm styled as Messrs. Wazid Ali Abid Ali,
constituted under a deed of partnership, which, inter alia
provided "that where the deed is silent, it shall be
governed by the Indian Partnership Act save and except that
on the death or demise of any partner the firm shall not be
dissolved but shall be carried on with the remaining
partners and that heir and representative of the deceased
partner who resides in India on such terms and conditions to
which they mutually agree. "
On June 4, 1964, one of the partners, Qamaruddin, died
and his son, Fariduddin, joined the firm as a partner. New
deed of partnership evidencing the change in the
constitution of the firm was not executed (before November
4, 1964). The assessee filed a declaration in Form No. XII
for the relevant assessment year 1965-66 under section
184(7) of the Act, signed by all the partners and Fariduddin
taken in as a partner in place of his father, Qamaruddin.
The Income Tax officer held that the admission of a new
partner in place of the deceased partners amounted to a
change in the constitution of the firm and as the firm had
failed to file a fresh application for registration, the
assessee was not entitled to the continued benefit of
registration under section 184(7) of the Act. An appeal
filed by the assessee before the Appellate Assistant
Commissioner was dismissed. The assessee preferred an appeal
to the Income
918
Tax Appellate Tribunal. The Tribunal held that the death of
Qamaruddin and the inclusion of Fariduddin involved a change
in the constitution of the firm and a fresh deed of
partnership should have been executed and a fresh
application for registration, filed. The Tribunal, however,
also held that the conditions laid down in sub-section (7)
of section 184 of the Act had been satisfied and the
assessee would be entitled to the benefit of registration
upto June 4, 1964; that is, a part of the previous year, and
that the Income Tax officer should have made a single
assessment only on the assessee and apportioned the total
income between the partners who were entitled to receive'
the profits accordingly as they were entitled to share the
profits, the firm being assessed as a registered firm in
respect of the profits for the remaining part of the
previous year. And the question "whether, on the facts and
in the circumstances of the case, the Tribunal was justified
in holding that for the period covered by the old
constitution the income was assessable in the hands of the
assessee as a registered firm?" was referred to the High
Court, which answered the question in favour of the revenue
and in the negative. The assessee appealed to this court for
relief, as aforementioned.
In the second appeal afore-mentioned at the instance of
the revenue, the assessee, a registered firm, consisted of
five partners, out of whom, one partner, Sarabhai Chimanlal
died on March 9, 1963. The assessee firm filed two returns
for the assessment year in question-one for the period
ending on March 9, 1963 and the other, for the rest of the
accounting period. A declaration under section 184(2) of the
Act was enclosed along with the return for the first period.
The two returns were filed on the basis that according to
the assessee there was a dissolution of the firm on the
death of the partner Sarabhai Chimanlal, and, therefore, the
subsequent continuance of business was only for the purpose
of winding up the firm. The Income Tax officer held that
there was a change in the constitution of the firm within
the meaning of section 187(2), and the assessee should have
applied for registration and should not have remained
content with the filing of the declaration under section
187(2) of the Act. The assessee filed an appeal before the
Appellate Assistant Commissioner, who dismissed the same.
The assessee then appealed to the Income Tax Appellate
Tribunal, which came to the conclusion that there was a
dissolution of the partnership on March 9, 1963, and at the
instance of the revenue the Tribunal referred to the High
Court, two questions "(1) Whether, in the facts and
circumstances of the case, there was any dissolution of the
partnership on the date of death of Shri Sarabhai Chimanlal
and that, therefore, there should be separate assessment
till the date of his death? and (2)
919
Whether in the facts and circumstances of the case,
provisions of section 187(2) apply to the facts of the case?
The High Court answered the first question in both parts in
the affirmative and in favour of the assessee, and the
second question, in the negative and in favour of the
assessee, and granted certificate to the revenue to appeal
to this court as aforementioned.
Allowing the assessee's appeal (the Allahabad case) and
dismissing the appeal by the revenue (the Gujarat case), the
Court,
^
HELD: The real question in both these appeals is when
there is a death of a partner within a previous year in the
case of a registered firm, what happens. [930B-C]
In the context of the relevant statutory provisions of
the Income Tax Act, 1961, the question arises whether on the
death of the partners in the situations of the two appeals,
the firm was dissolved or whether two assessments should be
made. [932H; 933A]
It is well to reiterate that in all cases, dissolution
does not take place by death if there is a contract to the
contrary. If that is so, then, in such a situation, the next
question is whether there was any contract to the contrary
in the situations of the two cases. [933A-Bl
There was a contract to the contrary in the Allahabad
case, where the deed of partnership provided, inter alia
that where the deed is silent, it shall be governed by the
Indian Partnership Act save and except that on the death or
demise of any partner, the firm shall not be dissolved but
shall be carried on with the remaining partners and that
heir and representative of the deceased partner who resides
in India on such terms and conditions as they mutually agree
to. Therefore on the death of the partner, there is no
dissolution by the expressed terms of the contract between
the parties but the partnership is deemed to be carried on
with the remaining partners and that heir and representative
of the deceased partner, who was in India. The terms and
conditions of the partnership, however, had to be mutually
agreed upon. In this (Allahabad) case, Qamaruddin, one of
the partners, died on June 4, 1964. Within the relevant
time, his son, Fariduddin joined the firm as a partner.
Before the expiry of November 4, 1964, that is, the
assessment year which expired on November 4, 1964, the
assessee had filed a declaration in Form XII for the
relevant assessment year 1965-66 under section 184(7) of the
Act. [933B-E]
920
In this case, on the death of Qamaruddin and the
inclusion of A Fariduddin, there was a change in the
constitution of the firm, but the firm was not dissolved.
Fresh deed had to be executed under sub-section (7) of
section 187. The application was not filed for the whole of
the assessment year; so, for a part of the assessment year,
the firm was registered and for the rest, the firm was not
registered. The Tribunal held that (1) the assessee would be
entitled to the benefit of registration upto June 4, 1964,
that is, a part of the previous year and (2) the total
income would be apportioned between the partners who were
entitled to receive the profits accordingly as they were
entitled to share the profits, the firm being assessed as a
registered firm in respect of the profits ending on June 4,
1964, and as an unregistered firm in respect of the profits
for the remaining part of the previous year. This conclusion
of the Tribunal is correct. An analysis of the different
sections of the Act lead to that conclusion and there is no
contrary provision in the Act. Such a conclusion is logical
and equitable and would do justice to both, the revenue and
the assessee. In the circumstances of the case, the course
open was to seek registration to execute a new deed of
partner-ship and apply for the registration of that deed, as
rightly held by the High Court, but failure to do so, does
not make the registration upto the date of the death of the
partner Qamaruddin invalid, and in the absence of any
express prohibition indicating the same, the firm was
entitled to the benefit of such registration. [933E-H; 934A-
E]
In the Allahabad case, the Tribunal took the correct
view and the High Court was in error in the view it took.
Judgment and order of the High Court set aside. The view of
the Tribunal upheld. [934G]
In the second appeal (Gujarat case), the question is
whether in the facts and circumstances of the case, there
was any dissolution of the partnership on the date of the
death of Shri Sarabhai Chimanlal and whether there should be
two separate assessments till the death or whether in the
facts and circumstances of the case, provisions of section
187(2) of the Act apply to the facts of this case. The High
Court found that the assessee's contention was right that
the firm, as found by the Tribunal, was dissolved and the
transactions were carried on with the remaining parties in
the course of the winding up and for the realisation of its
dues. The High Court, accordingly, answered rightly in the
affirmative and in favour of the assessee. There was in fact
a dissolution, as found by the Tribunal, and in the facts
and circumstances of the case, after the dissolution, the
firm ceased to exist and there should be two separate
assessments. The High Court was right in answering the
question as it did. The High Court was also right in
answering the
921
question in view of the fact that there was a death and as
such dissolution of the firm by the manner in which the
parties acted, there was no question of the same firm being
continued and the provisions of section 187(2) could not be
said to apply in the light of the facts. [939E-H]
In re. Hakerwal Colliery, [1942] 10 ITR 422,
Girdharilal Seetaram & Bros. v. C.I.T, [1949] 17 I.T.R. 282;
Pannalal Babulal v. C.I.T., [1969] 73 I.T.R. 503; Rex v.
General Commissioners for the City of London, 24 Reports of
Tax Cases 221; Commissioner of Income-Tax v. Shiv Shankar
Lal Ram Nath, 106 I.T.R. 342; Vishwanath Seth v.
Commissioner of Income Tax, U. P., 146 I.T.R. 249; Badri
Narain Kashi Prasad v. Additional Commissioner of Income
Tax, 115 I.T.R. 858; Sandersons Morgans v. Income Tax `A'
ward, District III (I), Calcutta, and others, 87 I.T.R. 270;
Joshi & Co. v. Commissioner of Income-Tax, 162 I.T.R. 268;
Girdharilal Nannelal v. Commissioner of Income-Tax, 147
I.T.R. 529; Commissioner of Income-Tax, Delhi-IV v. Sant Lal
Arvind Kumar, 136 I.T.R. 379; Dungarsidas Kaluram v.
Additional Commissioner of Income-tax, M.P., 132 I.T.R. 526;
Ganesh Dal Mills v. Commissioner of Income-Tax, 136 I.T.R.
762; Dahi Laxmi Lal Factory v. Income-Tax Officer, Sitapur,
and another, 13 I.T.R. 517; Additional Commissioner of
Income-tax, Gujarat v. Harjivandas Hathibhai, 108 I.T.R.
517; I. Ramakrishnaiah & Sons. v. Commissioner of Income-tax
Orissa, 111 I.T.R. 296; Tyresoles (India), Calcutta v.
Commissioner of Income-tax, Coimbatore, 49 I.T.R. 515 and
Mayukkaria (N) Estate Tea Factory v. Additional Commissioner
of Income-tax, Madras II, 112 I.T.R. 715, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION. Civil Appeal No. 1792(NT)
of 1974 etc.
From the Judgment and Order dated 22.2.1972 of the
Allahabad High Court in I.T. Reference No. 163 of 1970.
Dr. Gauri Shankar, Amicus Curiae, Manoj Arora and S.
Rajappa for the Appellant.
S.C. Manchanda, K.C. Dua and Miss A. Subhashini for the
Respondents.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. By this judgment we will dis-
922
pose of two appeals-first one at the instance of the
assessee and second one at the instance of the revenue-but
both these appeals deal with one common situation namely the
position of the registered firm during the assessment year
if one of the partners dies or retires. Civil Appeal No.
1792(NT) of 1974 is an appeal by the assessee from the
judgment and order of the Allahabad High Court dated 22nd
February, 1972 answering the following question referred to
it under section 256(1) of the Income-tax Act, 1961,
hereinafter referred to as the Act, for the assessment year
1965-66 in favour of the revenue and in the negative:-
"Whether, on the facts and in the
circumstances of the case the Tribunal was
justified in holding that for the period covered
by the old constitution the income was assessable
in the hands of the assessee as a registered firm?
For the assessment year 1965-66 the relevant previous
year commenced on 17th November, 1963 and ended on 4th
November, 1964. The assessee was a partnership firm styled
as Messrs Wazid Ali Abid Ali of Phulpur in the district of
Azamgarh. It was constituted under a deed of partnership
dated 17th March, 1959 with 17 members. The said deed
provided, inter alia, as follows:
"That where the deed is silent, it shall be
governed by the Indian Partnership Act save and
except that on the death or demise of any partner
the firm shall not be dissolved but shall be
carried on with the remaining partners and that
heir and representative of the deceased partner
who resides in India on such terms and conditions
to which they mutually agree."
On June 4, 1964, one of the partners, Qamaruddin died
and his son, Fariduddin joined the firm as a partner. New
deed of partnership evidencing the change in the
constitution of the firm was not executed before 4th
November, 1964. The assessee filed a declaration in Form No.
XII for the relevant assessment year 1965-66 under section
184(7) of the Act. The declaration was signed by the 16
members who had continued all along and also by Fariduddin
who had become a partner in place of his deceased father.
The Income Tax Officer held that the admission of a new
partner in place of the deceased partner amounted to a
change in the constitution of the firm. He, therefore, held
that the assessee was not entitled to the continued benefit
of registration under section 184(7) of the Act. He was of
the opinion that the firm had
923
failed to file a fresh application for registration and
therefore he disallowed the benefit of registration to the
firm. On appeal the Appellate Assistant Commissioner held
that the assessee should have filed a fresh application for
registration along with the partnership deed embodying the
change in the constitution of the firm. The appeal was
accordingly dismissed by him. The assessee preferred further
appeal to the Tribunal and urged that the change which
occurred on the death of Qamaruddin did not require the
execution of a new deed of partnership nor a fresh
application for registration. Alternatively, it was
contended that the assessee was entitled to the continued
benefit of registration at least for that part of the
previous year during which Qamaruddin had remained alive.
The Tribunal was of the view that the death of Qamaruddin
and the inclusion of Fariduddin involved a change in the
constitution of the firm. It was, therefore, necessary that
a fresh deed of partnership should have been executed as
well as a fresh application for registration filed. The
Tribunal, however, accepted the alternative contention and
observed that the conditions laid down in sub-section (7) of
section 184 of the Act had been satisfied and that the
assessee would be entitled to the benefit of registration
upto 4th June, 1964, that is to say, a part of the previous
year. In view of section 187(2) of the Act, it was
obligatory according to the Tribunal and the Income Tax
Officer to make single assessment only on the assessee and
to apportion the total income between the partners who were
entitled to receive the profits accordingly as they were
entitled to share the profits, the firm being assessed as a
registered firm in respect of the profits ending 4th June,
1964 and as an unregistered firm in respect of the profits
for the remaining part of the previous year. Thereupon the
aforesaid question was referred to the High Court.
The High Court was of the view that on the death of
Qamaruddin on 4th June, 1964 and on the entry of Fariduddin,
there was a change in the constitution of the firm.
According to the High Court, by virtue of section 42(c) of
the Indian Partnership Act, 1932 a firm was dissolved by the
death of the partner but as the section provided that was
subject to the contract between the partners. The High Court
was of the view that clause 7 of the partnership deed dated
17th March, 1959 specifically stipulated that the firm would
not be dissolved on the death of a partner but it would be
carried on with remaining partners and such heir of the
deceased partner who resides in India on terms and
conditions to which they mutually agree. The High Court was
of the view that if there was any heir of the deceased
partner who resides in India and agrees with the surviving
partners on the terms and condi-
924
tions on which he could be admitted to the partnership, the
firm would not be dissolved. The High Court was further of
the view that the condition that there should be mutual
agreement between the surviving partners and the incoming
partner indicated that the inclusion of the heir of the
deceased partner was not automatic one but rested on
agreement.
The High Court referred to the decision in In re
Makerwal Colleiry, [1942], 10 ITR. 422, where Monir, J.
Observed that under the partnership constituted by a deed of
partnership, the legal representatives of a deceased
partner, who by reason of a provision in the deed was
entitled but not bound to become a partner for a period
which might be the same or different from the period fixed
under the deed he was to continue in the partnership for the
unexpired portion of the period, the constitution of the
firm is altered and, therefore, the new firm could not apply
for the renewal of registration nor can in such a case the
new firm apply for registration of the original partnership
as ex hypothesi, the applicants for registration were not
parties to the deed of partnership. There the learned Judge
had further observed that the only course open to seek
registration was to execute a new deed of partnership and to
apply for the registration of that deed.
Reference was made by the High Court to the decision of
the Orissa High Court in Giridharilal Seetaram & Bros, v.
C.I.T., [1949] 17 ITR. 282. The Orissa High Court held that
in case where the partnership deed provided that on the
death of a partner his legal representative was entitled to
join the partnership and the partnership would be continued
without dissolution, an application for registration signed
by the surviving partners and the son of the deceased
partner was not defective and should not be rejected on the
ground that the original partnership deed without any
alteration had been produced. The learned Judge observed:
"It may be that ordinarily on the death of any of
the partners the firm gets dissolved automatically
but it does not so dissolve where the deceased
partner's heir automatically, by virtue of the
terms of the deed, becomes a partner without any
fresh agreement."
According to the High Court the aforesaid observation of the
learned Judge had not been endorsed by the Allahabad High
Court in Pannalal Babulal v. C.I.T., [1969] 73 ITR 503.
While agreeing to the observations in Makerwal Colliery
(supra) Oak, C.J., and T.P. Mukherjee J. found themselves
unable to adopt the view taken in Giridharilal
925
Seetaram & Bros. (supra) that on the death of a partner his
successor would become a partner of the firm automatically.
It was open to the heir, according to their decision, to
join or not to join the partnership. He was not bound to do
so. In that view, application for renewal of registration
signed by the surviving partners and the son of the deceased
partner could be rejected because the constitution of the
firm was no longer reflected in the instrument of
partnership. The High Court in the instant case was of the
view that the Tribunal was right in holding that the
inclusion of Fariduddin as a partner upon the death of
Quamaruddin resulted in a change in the constitution of the
firm and it could be no longer be given the continued
benefit of registration on the basis of original partnership
deed. The High Court was of the view that the next question
was whether the Tribunal was also right in holding that the
assessee was entitled to the continued benefit of
registration in respect of the profits after 4th June, 1964
that is to say the period during which Quamaruddin remained
alive. According to the High Court it was clear that
continued benefit of registration must be in respect of the
entire assessment year, and therefore it must affect the
profits of the entire year relating to the assessment year.
If the firm had dissolved on 4th June, 1964 with the death
of Quamaruddin the relevant previous year would have been
the period commencing from 17th November, 1963 to 4th June
1964 and the profits for that period would have been treated
for the assessment as in case of a registered firm. The firm
was, however, not dissolved and continued in existence
throughout the previous year that is to say from 17th
November, 1963 to 4th November, 1964. The High Court was,
therefore, of the view that there was merely a change in the
constitution of the firm. The High Court was of the opinion
that by reason of the proviso to subsection (7) of section
184 of the Act the registration granted in a preceding year
could not continue to have effect for the assessment year
under consideration. The High Court was of the view that it
was necessary for the assessee by reason of section 164(8)
of the Act to apply for fresh registration for the
assessment year concerned in accordance with the provisions
of section 184. That required an instrument evidencing the
partnership and specifying the individual shares of the
partners. The declaration in Form No. XII was misconceived,
according to the High Court. The view taken by the Tribunal
that the profits upto 4th June, 1964 should be treated as in
case of a registered firm and the profits for the rest of
the previous year should be treated as in case of an
unregistered firm, according to the High Court, found no
support in the statute. The High Court was of the view that
dividing the profits of the previous year in this fashion
amounted to treating the firm as a registered firm for a
part of the assessment year and an
926
unregistered for the remaining part. The High Court found it
difficult to conceive such a case under the Act. The High
Court was, therefore, of the view that the Tribunal was not
right in holding that during the period covered by the
constitution of the original partnership deed the income was
assessable in the hands of the assessee as a registered
firm. The High Court accordingly answered the question in
the negative. In consequence, the revenue succeeded. The
validity of this answer to the question has been challenged
in this appeal by the assessee. Indeed, on this question
divergent views have been taken by different High Courts as
we shall presently notice.
Civil Appeal No. 609(NT) of 1975 is an appeal by
certificate granted by the High Court of Gujarat and
admitted by this Court. This is an appeal from the High
Court of Gujarat at the instance of the revenue for the
assessment year 1964-65. The following two questions were
referred to the High Court of Gujarat:
"(1) Whether, in the facts and circumstances of
the case, there was any dissolution of the
partnership on the date of death of Shri Sarabhai
Chimanlal and that therefore there should be
separate assessment till the date of his death?
(2) Whether in the facts and circumstances,
of the case, provisions of section 187(2) apply to
the facts of the case?"
The facts involved in the said appeal were that the assessee
was a partnership firm. The firm was granted registration in
the preceding year 1963-64 under the Act. Originally the
firm consisted of five partners and one of the partners was
Sarabhai Chimanlal. Sarabhai died on 9th March, 1963. The
business of the firm was of executing contracts entered into
with the Railways for handling of goods at various Stations
and also some business in respect of coal, dealing in coal
on commission etc. The major part of the work was that of
handling contacts entered into with the Railways for
handling goods at Sabarmati Railway Station in Gujarat. On
the death of Sarabhai Chimanlal, the books of the
partnership firm dealing the contracts with the Railways
were closed. The firm was maintaining its accounts in three
separate sets of books. Set No. I dealt with the contracts
of Railways. In accounts maintained in Set No. II and Set
III books of accounts were continued but in accounts of Set
No. I balances were struck after preparing profit and loss
upto June, 1963, and the profits were credited to the
respective partners' account including the
927
receipts. Thereafter the account of the deceased was carried
forward in different books. In respect of the other
businesses, the books were closed but at the end of the
period of account, profits were determined and bifurcated
between periods, the first period till the date of death of
the deceased partner and the second period being after his
death. The previous year was Samvat Year 2019. Samvat Year
2019 commenced from 28th October, 1962 and ended on 27th
October, 1963. The profits were credited in the account of
Sarabhai along with the accounts of other partners for both
the periods so far as Set No. II and Set No. III were
concerned. The assessee firm filed two returns for the
assessment year in question-one for the period ending on 9th
March, 1963 and the other for the rest of the accounting
period. A declaration under section 184(2) was enclosed
along with the return for the first period. The basis on
which these two returns were filed was that according to the
assessee there was dissolution of the firm on the death of
Sarabhai Chimanlal and, therefore, the subsequent
continuance of business was only for the purpose of winding
up the firm. The Income Tax officer refused to accept the
contentions of the assessee and his main ground was that
there was a change in the constitution of the firm within
the meaning of section 187(2). Therefore, the assesee should
have applied for registration and should not have remained
content with the filing of the declaration under section
187(2) of the Act. Against the said decision, the assessee
appealed and the Appellate Assistant Commissioner agreed
with the conclusion of the Income Tax Officer and dismissed
the appeal. The assessee appealed to the Appellate Tribunal.
The Tribunal came to the conclusion that there was a
dissolution of the partnership on 9th March, 1963 and that
conclusion was drawn from the various circumstances which
the Tribunal took into consideration. Then at the instance
of the revenue, reference was made to the High Court on the
aforesaid two questions mentioned hereinbefore.
The Tribunal had negatived the contention that section
187(2) of the Act, applied to the facts and circumstances of
the case. The High Court took into account two clauses in
the background of the partnership deed. According to the
Tribunal that the balances were completely struck and
carried to a new set of books was an important circumstance
and evidence to find out whether the parties did want to
bring about dissolution. The Tribunal was of the view that
by virtue of clause 8 of the Partnership Deed the death of a
partner would not bring about a dissolution automatically,
yet by mutual consent of the parties which could be inferred
from the facts the firm has been dissolved. The High Court,
however, noted that the primary circumstance was that
928
the books of accounts in Set No. I, which was in respect of
major business, were closed on the death of the Sarabhai
Chimanlal. The Tribunal, however, had noted that the
contract in respect of the Sabarmati Railway Station was to
expire on 31st March, 1963 but the contract was deemed to
have been extended till 30th April, 1963. As soon as
Sarabhai died, books of accounts of the firm were closed and
necessary entries were effected in respect of other Railway
Stations also, since the contracts were terminated, that is,
in September, 1963 books of other Railway Stations were also
closed. The High Court noted that another major circumstance
in support of its conclusion was mutual consent for
dissolution of the firm and the fact that the partnership
firm did not enter into new business activities and did not
undertake any new contract. The High Court noted that if the
surviving partners of the firm wanted the firm should
continue as it could have continued under clause 8 of the
Partnership Deed then surely they would have taken new
contracts or entered into new activities because a firm like
the assessee firm surely would have come to a halt if there
were no business activities or no new business contracts.
The Tribunal had found considerable substance in the
contention of the assessee that after the death of Sarabhai,
the partners wanted to close the business. Another
circumstance which had appealed to the Tribunal was that the
profits earned subsequent to the death of Sarabhai were also
credited to the account of the deceased proportionately and
even in respect of profit earned for the subsequent period
the deceased partner was given profit. The High Court noted
that these, according to the assessee, indicated that the
firm was dissolved but in the course of winding up whatever
was realised was proportionately distributed and amount
coming to the share of the deceased was credited in his
account even though he had expired on 9th March, 1963. The
High Court noted that the Tribunal was of the view that the
conduct of the partner clearly indicated that firm had
agreed not to carry on business and whatever was done after
death of Sarabhai was merely by realisation of certain
outstanding dues in the course of dissolution of the firm in
discharging certain obligations by completing the contracts
entered into prior to the death of Sarabhai.
The High Court noted that there were two other
circumstances which were pointed out. One was that no new
deed of partnership was executed after Sarabhai's death nor
was any application made for registration by the surviving
partners. The application contemplated by Section 184(7) of
the Act was filed in connection with the period uptil March
9, 1963 and it was also pointed out before the High Court
that the major source of profits was of the business
mentioned in Set No. I,
929
that is, Sabarmati Railway contract and actually in other
accounts losses were being incurred or not much profit was
being incurred in the business set out in Set II and Set
III. After noting these facts, the High Court was of the
view that the important thing was the intention of the
partners and referring to the different clauses the High
Court was of the view that the conclusion of the Tribunal
that the partners had by mutual agreement decided to
dissolve the firm with effect from March 9, 1963 was a
correct and justified one and, therefore, the Tribunal was
also justified in holding that the rest of the activities
between March 9, 1963 and the end of the accounting period,
that is, till the end of Samvat Year 2019 were in the course
of the dissolution of the firm. The Tribunal was, therefore,
right in holding that there should be separate assessment
till the date of death of Sarabhai Chimanlal. So far as the
second question was concerned the High Court was of the view
that where at the time of making an assessment under Section
143 or section 144 of the Act, it was found that there was a
change which had occurred in the constitution of the firm,
the assessment should be made on the firm as constituted at
the time of the making of the assessment and one of the
consequences of a change occurring in the constitution of
the firm was that if there was any change in the previous
year the firm had to apply for fresh registration for the
assessment year concerned in accordance with the provisions
of Section 184. Under sub-section (2) of section 187, for
the purposes of section 187, there was a change in the
constitution of the firm if one or more of the partners
ceased to be a partner or one or more new partners were
admitted, in such circumstances where one or more of the
persons who were partners of the firm before the change had
continued as partner or partners after the change; or where
all the partners continued with a change in their respective
shares or in the shares of some of them. In those
circumstances, according to the High Court, since there was
dissolution of the firm with effect from March 9, 1963 there
was no question of the same firm being continued with change
in the constitution of the firm and the requirements of
clause (a) of sub-section (2) of Section 187 were not at all
satisfied. The High Court was further of the view that in
any event, so far as clause (b) was concerned all the
partners did not continue with some change in their
respective shares or in the shares of some of them since
Sarabhai who held thirty per cent share in the profits of
the firm had died on March 9, 1963 and thereafter there was
no new partner in his place. Of course, the estate of
Sarabhai as represented by his wife Kanchanben who was also
a partner got the benefit of the profits which went to the
share of Sarabhai but Kanchanben got that amount as
representing the estate of Sarabhai and not in her capacity
as a partner of the firm. Under
930
these circumstances the provisions of section 187(2) of the
Act could not be said to apply to the facts of the present
case. In the premises the High Court answered the first
question both parts in the affirmative and in favour of the
assessee. As to second the High Court answered it in the
negative and in favour of the assessee. The High Court
granted the certificate as mentioned hereinbefore to appeal
to this Court.
The real question with which we are concerned in both
these appeals is, therefore, when there is death of a
partner within a previous year in case of a registered firm
what happens.
In order to appreciate the controversy in this case, it
is necessary to have a perspective of the scheme of the Act
of the assessment of firms. Under the scheme of the Act
assessment of firm has been provided in Chapter XVI and it
can be found in sections 182 to 189 of the Act. Section 170
of the Act which is relevant in this connection provides
succession to business or profession and stipulates that
where a person carrying on any business or profession or
such person herein-after in that section being referred to
as the predecessor has been succeeded therein by any other
person who continues to carry on that business or
profession, the predecessor shall be assessed in respect of
the income of the previous year in which the succession took
place up to the date of succession; and the successor shall
be assessed in respect of the income of the previous year
after the date of succession. The other sub-sections of
section 170 deal with certain contingencies with which we
are not concerned. The expressions "firm" and "partnership"
have the same meaning as given in the Indian Partnership
Act, 1932. "Partnership" is defined by section 4 of the said
Act as the relation between persons who have agreed to share
the profits of a business carried on by all or any of them
acting for all. It is further stated that the relation of
partnership arises from contract and not from status.
Section 39 of the said Act provides dissolution of
partnership between all the partners of a firm called the
"Dissolution of the firm". A firm may be dissolved with the
consent of all the partners or in accordance with a contract
between the partners. Section 42 provides that subject to
contract between the partners a firm is dissolved, inter
alia see clause (c) by the death of a partner. It is
necessary to bear in mind that section 143 deals with
regular assessment and section 144 deals with best judgment
assessment. Section 182 of the Act which is in Chapter XVI
as mentioned hereinbefore provides for assessment of firm
and stipulates that notwithstanding anything contained in
sections 143 and 144 and subject to the provisions of sub-
section (3), in the case of a registered firm the income of
the firm shall be distributed
931
in the manner indicated therein. Sub-section (3) of Section
182 is not material for our purpose. Section 183 of the Act
deals with assessment of unregistered firms. Group of
sections under heading contained in section 184 to section
186 deal with registration of firm. Section 184 of the Act
deals with the application for registration of the firms
under the said Act. It is not necessary for the present
purpose to set out in extenso all the provisions of this
sub-section. It may, however, be borne in mind that an
application for registration of a firm must be made which is
evidenced by an instrument and such application may be made
during the existence of the firm or after its dissolution.
Sub-section (3) of section 184 stipulates that the
application shall be made to the Income-tax Officer having
jurisdiction to assess the firm, and shall be signed by all
the partners and in case of dissolution by all persons (not
being minors) who were partners in the firm immediately
before its dissolution and by the legal representative of
any such partner who is deceased. It further stipulates that
the application shall be made before the end of the previous
year for the assessment year in respect of which
registration is sought. The proviso to sub-section (4) also
provides that the Income-tax Officer may entertain an
application made after the end of the previous year, if he
is satisfied that the firm was prevented by sufficient cause
from making the application before the end of the previous
year. The other requirements of the application, the mode
and manner of making it as set out in other sub-sections are
not relevant for the present purpose except sub-section (7)
of section 184 which provides that where registration is
granted to any firm for any assessment year, it shall have
effect for every subsequent assessment year: Provided that
there is no change in the constitution of the firm or the
shares of the partners as evidenced by the instrument of
partnership on the basis of which the registration was
granted and the firm furnishes, before the expiry of the
time allowed under sub-section (1) or sub-section (2) of
section 139 (whether fixed originally or on extension) for
furnishing the return of income for such subsequent
assessment year, a declaration to that effect, in the
prescribed form and verified in the prescribed manner, so,
however, that where the Income-tax Officer is satisfied that
the firm was prevented by sufficient cause from furnishing
the declaration within the time so allowed, he may allow the
firm to furnish the declaration at any time before the
assessment is made. Sub-section 8 of section 184 provides
that where any such change has taken place in the previous
year, the firm shall apply for fresh registration for the
assessment year concerned in accordance with the provisions
of this section. So, therefore, normally where registration
is granted for any firm for any assessment year, it should
have effect for every subsequent assessment year unless
there is
932
any change in the constitution of the firm or the share of
the partners. If there is a change in the constitution of
the firm then in such a case the registration will not be
continued for subsequent years but will have to be applied
afresh. Section 185 deals with the procedure on receipt of
the application. It is not necessary for the present purpose
to deal with the provisions of the said section in the
instant case. Section 186 deals with the cancellation of
registration. It is also not necessary to set out the
provisions of the said section. The sections under the
heading Clause are Sections 187, 188 and 189 of the Act and
deal with changes in constitution, succession and
dissolution. Sub-section (1) of section 187 provides that
where at the time of making an assessment under section 143
or section 144 of the Act it is found that a change has
occurred in the constitution of a firm, the assessment shall
be made on the firm as constituted at the time of making the
assessment. The said sub-section further provides that the
income of the previous year shall, for the purposes of
inclusion in the total incomes of the partners, be
apportioned between the partners who, in such previous year,
were entiled to receive the same; and when the tax assessed
upon a partner cannot be recovered from him, it shall be
recovered from the firm as constituted at the time of making
the assessment. Sub-section (2) of section 187 provides that
for the purpose of this section, that is to say, section
187, 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 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 where all the partners continue with a change in
their respective shares or in the shares of some of them.
Section 188 deals with succession of one firm by another
firm. It provides that where a firm carrying on a business
or profession is succeeded by another firm, and the case is
not one covered by section 187, separate assessments shall
be made on the predecessor firm and the successor firm in
accordance with the provisions of section 170. It may be
mentioned that a proviso to sub-section (2) of section 187
had been inserted by the Taxation Laws (Amendment) Act, 1984
with retrospective effect from Ist of April, 1975. It
provides that nothing contained in clause (a) that is to
say, indicating where the change in the constitution of the
firm is supposed to have taken place, shall apply to a case
where the firm is dissolved on the death of any of its
partners. Section 189 deals with firm dissolved or business
discontinued. In the context of the above statutory
provisions, the question in the instant case is whether on
the death of the partners in the two situations mentioned in
the above two decisions out of which these appeals have
arisen, whether the firm was dissolved
933
or whether two assessments should be made. Now it is well to
reiterate that in all cases dissolution does not take place
by death if there is a contract to the contrary. If that is
so then in such a situation, the next question is whether
there was any contract to the contrary in the two situations
as contemplated in the decisions with which we are
concerned, one of the Allahabad High Court and the other of
the Gujarat High Court.
There was contract to the contrary, in our opinion, in
the Allahabad High Court's decision, where the deed
provided, inter alia, that where the deed is silent, it
shall be governed by the Indian Partnership Act save and
except that on the death or demise of any partner the firm
shall not be dissolved but shall be carried on with the
remaining partners and that the heir and representative of
the deceased partner who resides in India on such terms and
conditions to which they mutually agree. Therefore, on the
death of the partner, there is no dissolution by the
expressed terms of the contract between the parties but the
partnership is deemed to be carried on with the remaining
partners and that heir and representative of the deceased
partner. The terms and conditions, however, of such carrying
on had to be mutually agreed. In that case as mentioned
hereinbefore that Qamaruddin one of the partners died on 4th
of June, 1964 being within the relevant time his son,
Fariduddin joined the firm as a partner. Before the expiry
of 4th November, 1964, that is to say, the assessment year
which expired on 4th November, 1964, the assessee had filed
a declaration in Form No. XII for the relevant assessment
year 1965-66 under section 184(7) of the Act. We are of the
opinion that in this case on the death of Qamaruddin and the
inclusion of Fariduddin there was a change in the
constitution of the firm. It did not dissolve the firm but
brought about a change in the constitution of the firm.
Fresh deed had to be executed under sub-section (7) of
Section 187. This follows from the analysis of the different
sections of the Act. The application was not filed for the
whole of the assessment year so for part of the assessment
year the firm was registered and the rest the firm was not
registered. The Tribunal held that the assessee would be
entitled to the benefit of registration upto 4th June, 1964,
that is to say, a part of the previous year. The Tribunal
further held that to apportion the total income between the
partners who were entitled to receive the profits
accordingly as they were entitled to share the profits, the
firm being assessed as a registered firm in respect of the
profits ending on 4th of June, 1964 and as an unregistered
firm in respect of the profit for the remaining part of the
previous year. In our opinion this conclusion is correct.
The High Court has held that there is no warrant for this
view. We are unable to
934
agree. As a matter of fact an analysis of the different
sections of the Act lead to that conclusion and there is no
contrary provision in the Act. Such a conclusion is logical
and equitable and would do justice to both the revenue as
well as to the assessee. Our attention was not drawn to any
decision of this Court which is against that view, though
there is certain amount of divergence of views amongst the
High Courts on this aspect. According to the High Court, by
virtue of section 42(c) of the Indian Partnership Act, a
firm was dissolved by the death of the partner but as the
section provided that was subject to the contract between
the parties. The High Court was right in the view that
clause (7) of the partnership deed dated 17th of March, 1959
specifically stipulated that the firm would not be dissolved
on the death of a partner but it would be carried on with
remaining partners and such heir of the deceased partner who
resides in India on terms and conditions to which they
mutually agreed. The High Court was of the view, in our
opinion, rightly that if there was an heir of the deceased
partner who resides in India and agrees with the surviving
partners on the terms and conditions on which he could be
admitted to the partnership, the firm would not be
dissolved. The High Court was further of the view that the
inclusion of such partner depended upon the mutual agreement
between the surviving partners and was not automatic one, on
the death of the deceased partner. In the background of the
facts of this case, we are of the opinion that the High
Court was right that in such circumstances the course open
was to seek registration to execute a new deed of
partnership and to apply for the registration of that deed.
But that does not make the registration upto the date of the
death of the deceased partner invalid and in our opinion,
subject of any express prohibition indicating the same, the
firm is entitled to the benefit of such registration. We
have found no such express prohibition, as the analysis of
the various sections indicate. On the other, it would be
just and equitable and that the assessee should have that
limited benefit. We are of the opinion that the Tribunal
took the correct view in the first case.
In the aforesaid view of the matter it must be held
that the Allahabad High Court was in error in the view it
took. The Tribunal was right. The appeal must be allowed,
and the judgment and order of the High Court must be set
aside.
large number of authorities were cited before us but we
shall note some of these. But we are of the opinion that for
answering the particular question in view of the clear
consequences that flow from the analysis of the sections, it
is not necessary to be bogged by deci
935
sion. We may, however, refer to Stroud's Judicial
Dictionary, Fourth Edition, pages 412-414 where the meaning
of the expression "cease" has been analysed from different
angles. When and how does a partner cease to be a partner
has, however, to be determined in the context of particular
set of facts. It is not necessary to refer to the decision
in Rex v. General Commissioner of Income Tax for the City of
London, 24 Reports of Tax Cases 221 where the shares of
erstwhile partnership business were apportioned in a
particular manner. These though throwing light, however, are
non-sequitur for the issue before us.
Commissioner of Income-tax v. Shiv Shankar Lal Ram
Nath, 106 I.T.R. 342 is a Bench decision of the Allahabad
High Court which held that in case where a firm is
reconstituted the old firm ceases to exist. It was observed
by the court that section 187 of the Act even by implication
does not create a fiction that the income derived by the old
firm becomes the income of the reconstituted firm. The High
Court held that the Tribunal was right in holding that after
reconstitution it becomes a separate assessable unit. The
same High Court in a Full Bench decision of 5 Judges held
that it was well settled that on the death of a partner the
constitution of the firm changes. It observed that if a
partner dies and is replaced by a legal representative there
is a change in the constitution of the firm and the new firm
will be liable in respect of the income derived from the old
firm. The Full Bench suggested that after the reconstitution
the firm becomes a distinct assessable entity, different
from the firm before its reconstitution. It observed that
two different assessment orders had to be passed, one in
respect of income derived by it before reconstitution and
the other in respect of income derived after its
reconstitution. The decision under appeal here was overruled
by the said Full Bench decision. But the Full Bench of the
Allahabad High Court consisting of 5 learned Judges in
Vishwanath Seth v. Commissioner of Income-tax, U.P. 146
I.T.R. 249 overruled the previous decision of that court in
Commissioner of Income-tax v. Shiv Shanker Lal Ram Nath,
(supra) and Badri Narain Kashi Prasad v. Addl. Commissioner
of Income-tax, 115 I.T.R. 858. This Full Bench ruled that
under the general law of partnership under the Indian
Partnership Act as well as under section 187 of the Act in
case of reconstitution of a firm it retains its identity and
is assessable in respect of the entire previous year. In
view, however, under the scheme of Chapter XVI of the Act,
we are unable to agree; if we were left with general
position under the Indian Partnership Act, we might have
agreed. That decision of the High Court, however did not
deal with the controversy in issue.
936
It was held by one of us (Sabyasachi Mukharji) sitting
singly in the Calcutta High Court in Sandersons & Morgans v.
Income-tax, "A" Ward, District III(I), Calcutta, and others,
87 (I.T.R. 270), that a "change in the constitution of a
firm" normally and ordinarily would mean every alteration in
the set up of the firm, that is to say, death, retirement,
incapacity of partners, alteration in the shares of the
partners in the firm etc. It was so mentioned in the Maxwell
on the Interpretation of Statutes, 10th edition and
observations appearing at page 76 of the said book. The said
decision of the single Judge was confirmed by Bench decision
of that court and is reported in 108 I.T.R. 954 and it was
reiterated that if one of the partners dies or retires there
is change in the constitution of the firm even if there is
no dissolution. This decision was also noted in Bench
decision of the Calcutta High Court in Joshi and Co. v.
Commissioner of Income-tax, 162 I.T.R. 268 at page 280.
The Full Bench of the Madhya Pradesh High Court in
Girdharilal Nannelal v. Commissioner of Income-tax 147
I.T.R. 529 held that any matter for which a provision was
made in the Income-tax Act, 1961, was to be governed by it,
notwithstanding anything different or to the contrary
contained in the general law relating to that matter. It was
further held that in the case of a change in the
constitution of a firm during the accounting year, the
income earned by the firm before such dispute was to be
clubbed with the income earned after such change and a
single assessment had to be made on the firm for the entire
accounting period. On the analysis of the different sections
of the Act we are unable to agree with this conclusion.
The Delhi High Court, however, held in the case of
Commissioner of Income-tax, Delhi-IV v. Sant Lal Arvind
Kumar (136I.T.R.379), that Section 187 of the Income-tax Act
came into operation and applied only when there was in the
eye of law a firm with continued existence and not to a case
where under the law one firm had ceased to exist and another
came into existence. The High Court observed that the
purpose of sub-section (2) of section 187 was not one of
expansion of the normal concept of a change in the
constitution of a firm but was really one of limitation; the
purpose was not to say that a firm would continue in spite
of dissolution but rather to say that, even in a case where
there was only a change in the constitution, sub-section (1)
would not apply if the partners before or after the change
were not common. It is not correct, according to the High
Court, to say that section 187(2) contemplated a change in
all cases where the business continued though in the hands
of a different firm provided there were
937
common partners. The High Court was of the view that though
creating a mild ambiguity, the language of section 188 is
not only inconsistent or contradictory but in a way is to
clarify the meaning of section 187 and to exclude the
possibility of the common law doctrine regarding the
possibility of a firm even in case of a mere change in the
constitution. The concept of partnership, it was held, is
one of the agreement between the partners. If the partners
agreed, not that one partner should go out and another
should come in, but that on a particular event happening the
firm should be treated as dissolved, they are entitled to
say so, and what the partners have disrupted and it is not
for the department to unite unless there is specific
authorisation in the Act. Where there is, however, no
agreement to treat the firm as continuing notwithstanding
the death of a partner, the partners have no option to treat
the firm as continuing under the Indian Partnership Act,
1932, the firm gets dissolved and the Income Tax Officer is
not entitled to ignore this consequence. There is nothing in
the language of sections 187, 188 or 189, according to High
Court, which precludes the application of the partnership
law principles even under the Income-tax Act. It was
accordingly, held by the High Court that where the
partnership deed of a firm did not contain any provision
that the death of a partner would not dissolve the firm, one
of the partners of the firm died in the middle of the
accounting period and thereafter a fresh deed was executed
under which the surviving partners took a fresh partner in
the place of the deceased and continued to carry on the
business, the case was one of succession and not change in
the constitution and separate assessments had to be made in
regard to the incomes. With respect we agree that where in a
case, there is a change in the constitution of the firm by
taking of a new partner and an old firm succeeded by a new
firm then in such a case, there might be succession and
there could be two assessments as contemplated under section
188 of the Act. We accept the reasoning of that decision.
large number of decisions were referred to us as
indicating divergent views. The view which found favour with
the Tribunal in the instant case was accepted more or less
by the Madhya Pradesh High Court in Dungarsidas Kaluram v.
Addl. Commissioner of Income-tax M.P., 132 I.T.R. 526;
Ganesh Dal Mills v. Commissioner of Income-tax, 136 I.T.R.
762, by the Allahabad High Court in Dahi Laxmi Dal Factory,
v. Income-tax Officer, Sitapur, and another, 13 I.T.R. 517,
by the Gujarat High Court in Addl. Commissioner of Income-
tax, Gujarat v. Harjivandas Hathibhai, 108 I.T.R. 517, by
the Orissa High Court in I. Ramakrishnaiah & Sons v.
Commissioner of Income-tax, Orissa, III I.T.R. 296, by the
Madras High Court in Tyresoles (India), Calcutta v.
938
Commissioner of Income-tax, Coimbatore, 49 I.T.R. 515;
Mavukkarai (N) Estate Tea Factory v. Additional Commissioner
of Income-tax, Madras-II, 112 I.T.R. 715.
Our attention was, however, drawn to a decision of the
Calcutta High Court in the case of Joshi and Co. v.
Commissioner of Income-tax, (supra). The court held in that
case that on the construction of the relevant sections and
the rules framed under the Act of 1961, it appears that
under the Income-tax Act, 1961, all that an assesee-firm was
required to submit is an instrument of partnership as
documentary evidence of partnership. It was not stated in
the Act that evidence must be contemporaneous nor was it
laid down that the instrument of partnership must be
executed within the accounting year. On the other hand, it
had been left open to the Income-tax Officer to accept an
application after the end of the accounting year and a duty
was cast on the assessee to submit to the Income-tax Officer
all subsequent instruments, if any, which may be in
existence, right upto the date of the application showing
the changes in the constitution of the firm. Under rule 23,
all changes in the constitution even after the date of the
application, are required to be intimated to the Income-tax
Officer. The duty cast on the Income-tax Officer under the
Act of 1961 is to ascertain the genuineness of the firm and
its constitution as specified in the instrument. The Income-
tax Officer may entertain an application made even after the
end of the accounting year if he is satisfied that the firm
was prevented by sufficient cause from making the
application before the end of such period. In commercial
practice, the terms of a partnership constituted initially
under an oral agreement are often subsequently recorded in
writing in an instrument. It was held that this was not
prohibited in law. The instrument showed that the
partnership had come into existence from the date other than
that of the execution of the instrument and also the terms
and conditions on which the partnership had been and was
being carried on. The Indian Income-tax Act, 1922, required
the Income-tax Officer to certify the register the deed
itself and the registration of the firm would follow. That
is not so under the Income-tax Act of 1961. The High Court
referred to the proviso to section 187(2) and observed that
it could not be interpreted to mean that in every case where
one of the partners died, the firm was and must be held to
be dissolved for the purpose of registration under the
Income-tax Act. The language of the proviso was clear and it
stated that nothing in clause (a) of section 187(2) of the
Act should apply to a case where a firm was dissolved on the
death of any of its partners. In the facts of this case
before the High Court, it was held by the High Court that
the assessee firm was not dissolved on the death of
939
B, one of its partners. Under the terms of the deed, one of
the heirs of the deceased partner was inducted as a partner
in the firm in respect and to the extent of the share and
interest of the deceased partner. Hence, there had been a
change in the constitution of the firm. It was held that the
assessee was entitled to registration for the assessment
year 1976-77 on the strength of its application made in
Forms Nos. II and IIA and on the strength of the new deed of
partnership executed after the end of the accounting year.
We are in agreement with the views expressed in the said
decision. It may, however, be mentioned that so far as the
High Court had held that the assessee firm was not dissolved
from the death of one of the partners in view of the terms
of the partnership deed, but there is a change in the
constitution of the firm, the High Court was right. Whether
the assessee was entitled to registration in the facts of
that case on the strength of its application in Forms Nos.
II and IIA would, however, require closer examination when
the facts of that case are re-examined.
In the aforesaid view of the matter, we are of the
opinion as indicated earlier the High Court of Allahabad in
Civil Appeal No. 1792 of 1974 was in error in the view it
took. The appeal must be allowed and the judgment and order
of the High Court must be set aside. The view of the
Tribunal must be upheld.
So far as Civil Appeal No. 609 is concerned the
question is whether in the facts and circumstances of the
case, there was any dissolution of the partnership on the
date of death of Shri Sarabhai Chimanlal and there should be
two seprarate assessments till the death or whether in the
facts and circumstances of the case provisions of section
187(2) apply to the facts of this case. There the High Court
found on examination of the facts of that case, that the
assessee's contention was right that the firm as found by
the Tribunal was dissolved and the transactions were carried
on with the remaining parties in the course of the winding
up and for realisation of its dues. The High Court
accordingly answered rightly in the affirmative and in
favour of the assessee. There was in fact a dissolution as
found by the Tribunal and in the facts and circumstances of
that case and after the dissolution the firm ceased to exist
there should be two separate assessments. The High Court was
right in answering the question as it did. It appears to us
that the High Court was also right in answering the record
question in view of the fact that there was a death and as
such dissolution of the firm by the manner in which the
parties acted, that there is no question of the same firm
being continued and the provisions of section 187(2) could
not be said to apply in the light of the facts.
940
In the view we have taken of the matter, in this
appeal, the Civil Appeal No. 609 (NT) of 1975, must fail and
is accordingly dismissed.
In the facts and circumstances of the case the parties
in both the appeals will bear their own costs.
S.L. C.A.No. 1792/74 is allowed and C.A.No. 609(NT)/75 is
dismissed.
941
