1998 (6) TMI 71 - HC - Income Tax

Summary

Issues:
1. Change in the constitution of the assessee-firm
2. Entitlement to substitute the declaration for registration
3. Entitlement to registration under the Income-tax Act, 1961

Issue 1: Change in the constitution of the assessee-firm
The case involved a partnership firm constituted under a deed of partnership, with five partners each having a 20% share in profit and loss. The partnership deed stated that in case of death, insolvency, or retirement of a partner, the partnership would continue by the remaining partners. One partner died 16 days before the end of the assessment year. The firm was registered under section 185 of the Income-tax Act, 1961. The Appellate Assistant Commissioner allowed the firm to submit Form No. 11A to rectify the registration issue due to the death of a partner. However, the Income-tax Appellate Tribunal disagreed, stating that the firm could not file Form No. 11A after filing Form No. 12 for renewal of registration. The Tribunal held that the change in the constitution of the firm rendered the earlier direction improper.

Issue 2: Entitlement to substitute the declaration for registration
The Supreme Court's decision in Wazid Ali's case was cited, where it was held that a partnership firm is entitled to the benefit of registration up to the date of death of a partner. The Court emphasized that the death of a partner during the assessment year does not invalidate the registration up to that date. In the present case, the assessee was entitled to the benefits of a registered firm from October 20, 1970, to October 3, 1971, until the death of the partner. The Court concluded that the firm should have the limited benefit of registration despite the change in the constitution due to the partner's death.

Issue 3: Entitlement to registration under the Income-tax Act, 1961
Based on the Supreme Court's decision in Wazid Ali's case and the specific circumstances of the present case, the Court held that the assessee was entitled to the benefit of registration till the death of the partner on October 3, 1971. Consequently, the Court answered question No. 3 in the affirmative and in favor of the assessee, rendering questions 1 and 2 unnecessary to address. The reference was disposed of accordingly, with no orders as to costs.