1998 (12) TMI 47 - HC - Income Tax

Issues Involved:
1. Entitlement of the assessee-firm to registration under the IT Act, 1961, for the assessment year 1978-79.
2. Interpretation of the relevant provisions of the IT Act, 1961, and IT Rules, 1962, regarding the registration of firms and changes in their constitution.
3. Validity of the declaration filed by the assessee-firm under Form No. 12.
4. Distinction between dissolution of a firm and change in the constitution of a firm.

Issue-wise Detailed Analysis:

1. Entitlement of the Assessee-Firm to Registration:
The primary issue was whether the assessee-firm was entitled to registration under the IT Act, 1961, for the assessment year 1978-79. The Tribunal had concluded that the firm was entitled to registration for the part of the accounting period up to the death of one of its partners on 16th Sept., 1977. However, the High Court disagreed, holding that the firm was not entitled to continued registration for part of the year based on the declaration made under s. 184(7) and r. 24 in Form No. 12.

2. Interpretation of IT Act, 1961, and IT Rules, 1962:
The court analyzed the scheme relating to the registration of firms under the IT Act, 1961. It emphasized that a firm is treated as a separate assessable entity, and the registration procedure is governed by Chapter XVI, Part B of the Act. The relevant provisions, including s. 184(7) and s. 184(8), were discussed in detail. The court highlighted that an application for registration must be made in the prescribed form and contain the prescribed particulars, and any change in the constitution of the firm necessitates a fresh application for registration.

3. Validity of the Declaration under Form No. 12:
The court scrutinized the declaration filed by the assessee-firm in Form No. 12. It noted that Form No. 12 requires a declaration of no change in the constitution of the firm or the shares of the partners for the entire previous year. The court found that the declaration made by the assessee-firm was not in accordance with the statutory provisions, as it only covered the period up to the death of the partner. Therefore, the declaration was invalid, and the firm could not claim continued registration for the assessment year 1978-79.

4. Distinction between Dissolution and Change in Constitution:
The court distinguished between the dissolution of a firm and a change in its constitution. It explained that under s. 187, a change in the constitution of a firm requires a single assessment for the entire previous year, while s. 188 contemplates separate assessments for the predecessor and successor firms in case of succession. The court emphasized that the firm in question had not dissolved but had merely undergone a change in constitution due to the death of a partner. The partnership deed explicitly stated that the firm would not dissolve upon the death of a partner. Therefore, the firm was required to file a fresh application for registration under s. 184(8) in Form No. 11A, which it failed to do.

Conclusion:
The High Court concluded that the Tribunal erred in its decision. The firm was not entitled to continued registration for the part of the year based on the declaration made under s. 184(7), r/w r. 24, and Form No. 12. The court answered the referred question in the negative, in favor of the Revenue and against the assessee, holding that the firm was not entitled to registration for the assessment year 1978-79. There was no order as to costs.

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