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TMI Blog1986 (9) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 14,845 as the share of profit from the firm till the date of retirement. 3. On appeal before the AAC the assessee explained that she was given only the capital and other balances to her credit in the accounts of the firm as on the date of retirement and the books of account have been closed on 31-3-1978 and the profits of the firm for the entire year, i.e., from 1-4-1977 to 31-3-1978 were ascertained on 31-3-1978 and the same was allocated to the persons who were partners of the firm as on that date, viz., Miss Kochuthresia Antony, Miss Etty Antony and Shri P.A. Jose. The assessee further contended before the AAC that as per the original partnership deed as well as the new deed, the profits were to be ascertained only on the normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm, Peetees Agencies, Cochin. His arguments were to the following effect : The order of the AAC insofar as it directed deletion of the assessee's share income in the firm of Peetees Agencies, till the date of her retirement from the firm is against law and the facts of the case. He should have appreciated that the share income has been adopted according to the order under section 158 of the Income-tax Act, 1961 ('the Act') in the case of the firm. In the absence of any express stipulation in the deed of partnership entered into between the assessee and others on 31-3-1975 that the right to the share of profits accrues to the partners only when the accounts are finally closed on the normal closing date, the AAC should not have directed dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in Ashokbhai Chimanbhai's case applies only to a continuing firm and not to a firm which has become extinct by the retirement of a partner. Further, the appeal filed by the assessee before the AAC is not maintainable as per section 247 of the Act. Moreover, the ITO in his assessment order dated 31-1-1981 in the case of the firm, Peetees Agencies allocated Rs. 14,845 to the assessee as per clause (i) of proviso to section 187(1) of the Act. 7. We have considered the rival submissions. Retirement of a partner from a firm does not dissolve the firm or extinct the firm as laid down by the Gujarat High Court in the case of Keshavlal Lallubhai Patel v. Patel Bhailal Narandas AIR 1968 Guj. 157. Section 247 provides that any partner of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to who were the partners that were entitled to receive the same. It is exactly at this juncture, the ITO has failed to appreciate the law laid down by the Supreme Court in Ashokbhai Chimanbhai's case. The firm Peetees Agencies came into existence from 1-4-1975 with three partners as under : Name of partner Share of Share of profit loss Mrs. Mary Antony 50 per cent 80 per cent Shri P.A. Jose 10 per cent 20 per cent Mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imanbhai's case the ITO held that the assessee was also entitled to Rs. 14,845 out of the income of the firm for the assessment year 1978-79. So the mere fact of apportionment under section 187(1) cannot fasten a liability on the assessee. Now we have to look whether the assessee is entitled to any share of profit when he retired on 31-8-1977 and when the books of account were not closed to profit and loss on that date. Clause 11 of the partnership deed dated 31-3-1975 clearly shows that annual profit and loss account shall be prepared as on 31st day of March each year. It has been laid down by the Supreme Court in Ashokbhai Chimanbhai's case that in the case of a partnership the profits do not accrue to a partner from day to day or even fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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