1976 (11) TMI 63 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to be assessed as a registered firm under Section 184(7) of the Income-tax Act, 1961, after the death of a partner.
2. Alleged defectiveness of the application for registration continuation.

Issue-wise Detailed Analysis:

1. Entitlement to be Assessed as a Registered Firm:
The appellant, a firm of solicitors, argued that despite the death of a partner, Mr. Heramba Nath Bhattacharjee, on December 7, 1963, the firm should still be assessed as a registered firm under Section 184(7) of the Income-tax Act, 1961. The firm contended that the death did not constitute a change in the constitution of the firm as per the partnership agreement, particularly Clause 4, which stated that the death or retirement of any partner would not dissolve the partnership. They further argued that no new partner was brought in to replace Mr. Bhattacharjee, and the accounting was to be done up to December 31, 1963, as per Clause 8 of the partnership agreement.

The court, however, held that the death of a partner indeed resulted in a change in the constitution of the firm. It emphasized that Section 184(7) makes it clear that registration continues only if there is no change in the constitution of the firm. The court noted that the proviso to Section 184(7) was not satisfied because the death of Mr. Bhattacharjee reduced the number of partners, thereby changing the firm's constitution. The court dismissed the appellant's reliance on previous case law, stating that the cited cases either did not support their argument or were not applicable under the new Act.

2. Alleged Defectiveness of the Application:
The second contention raised by the appellant was that the application for the continuation of registration was not defective. However, the court found it unnecessary to delve into this issue. Given the conclusion that there was a change in the constitution of the firm, the firm was not entitled to the benefit of Section 184(7), and thus the question of the application's defectiveness was moot.

Conclusion:
The court concluded that the death of a partner constituted a change in the constitution of the firm, disqualifying it from being assessed as a registered firm under Section 184(7) for the year 1963. Consequently, the appeal was dismissed with no order as to costs. The operation of the order was stayed for three weeks upon the appellant's request.