1978 (9) TMI 9 - HC - Income Tax

Summary

Issues:
1. Entitlement to renewal of registration for a firm after the death of a partner without executing a new partnership deed.
2. Allowance of renewal of registration for a firm until the death of a partner.

Detailed Analysis:
The judgment pertains to a firm constituted under a partnership deed seeking renewal of registration after the death of a partner. The firm had been granted registration under the Indian Income Tax Act for several years based on the same partnership deed. However, upon the death of a partner and the inclusion of legal representatives as partners without a new deed, the Income Tax Officer (ITO) refused renewal, citing a change in the firm's constitution without a fresh partnership deed.

The Tribunal initially reversed the ITO's decision, but upon further appeal, it upheld the refusal of renewal. The matter was referred to the High Court to determine the firm's entitlement to renewal of registration. The court considered the original partnership deed and the subsequent reconstitution of the firm due to the partner's death.

The Full Bench held that upon reconstitution, the firm becomes a distinct assessable entity, separate from the original firm. It emphasized that two different assessment orders are required for the income before and after reconstitution, and the income of the original firm cannot be attributed to the reconstituted firm. The court noted that the original firm, until its reconstitution, continued its legal existence and was entitled to renewal of registration for the assessment year up to the date of reconstitution.

Referring to precedent and legal provisions, the court highlighted that in cases where a partner dies but the firm continues its business, the constitution of the firm changes, leading to the existence of two assessable entities. The court distinguished between the assessment of the original firm and the reconstituted firm for different periods within the same assessment year.

In conclusion, the court answered the first question against the assessee, indicating that the reconstituted firm was not entitled to renewal of registration based on the original partnership deed. However, the second question was answered in favor of the assessee, allowing renewal of registration for the period until the death of the partner. The court also clarified its reliance on previous decisions of the High Court, disregarding contrary views from other jurisdictions.