1990 (11) TMI 39 - HC - Income Tax

Summary

Issues Involved:
1. Single assessment for the assessment year 1974-75.
2. Dissolution of partnership on the death of a partner.
3. Separate assessment for the period September 1, 1973, to March 31, 1974.

Detailed Analysis:

Issue 1: Single Assessment for the Assessment Year 1974-75
Question: Whether the Income-tax Officer was justified in making a single assessment for the assessment year 1974-75 for the period April 1, 1973, to March 31, 1974.

Analysis: The court found that the firm stood dissolved on August 4, 1973, upon the death of one of the partners. Consequently, the business was continued by the surviving partners until August 31, 1973, and a new firm was formed on September 1, 1973. Given this dissolution and the formation of a new firm, the court held that the Income-tax Officer was not justified in making a single assessment for the entire period. Instead, assessments should be made for the three distinct periods: April 1, 1973, to August 4, 1973; August 5, 1973, to August 31, 1973; and September 1, 1973, to March 31, 1974. This decision was in line with the Appellate Assistant Commissioner's and Tribunal's earlier findings.

Issue 2: Dissolution of Partnership on the Death of a Partner
Question: Whether there was a dissolution of partnership on the death of one of the partners on August 4, 1973.

Analysis: The court examined the terms of the partnership deeds and the provisions of the Indian Partnership Act, particularly section 42(c), which states that a firm is dissolved by the death of a partner unless there is a contract to the contrary. The partnership deeds did not contain any provision that the firm would continue undissolved despite the death of a partner. Therefore, by operation of section 42(c), the firm stood dissolved on August 4, 1973. The court dismissed the Revenue's argument that the firm continued with only a change in its constitution, emphasizing that the dissolution was brought about by the operation of law, not by the partners' conduct or declarations.

Issue 3: Separate Assessment for the Period September 1, 1973, to March 31, 1974
Question: Whether a separate assessment should be made for the period September 1, 1973, to March 31, 1974, after considering the question of grant of registration.

Analysis: Given the dissolution of the original firm on August 4, 1973, and the formation of a new firm on September 1, 1973, the court upheld the view that separate assessments were necessary. The Appellate Assistant Commissioner had directed the Income-tax Officer to consider the question of registration afresh for the new firm for the period from September 1, 1973, to March 31, 1974. The Tribunal concurred with this direction, and the court affirmed it, stating that the assessments should be made separately for the three distinct periods identified.

Conclusion:
The court answered all three questions in the affirmative and against the Revenue, affirming the directions given by the Appellate Assistant Commissioner and the Tribunal. The assessee was entitled to separate assessments for the distinct periods due to the dissolution of the original firm on the death of a partner and the subsequent formation of a new firm. The assessee was also awarded costs of Rs. 500 for the references.