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TMI Blog1968 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... f the five, H. K. Kola died in December 1940, and the remaining four partners continued the firm and the business though a new deed of partnership came to be executed taking effect from 1st April, 1941. This firm continued till 31st March, 1948. In 1948, in consequence of certain disputes between the partners, which were referred to the arbitration of Sir Jamshedji B. Kanga, the firm was dissolved as from 1st April, 1948, by virtue of an award given by Sir Jamshedji. It is not in dispute now that this date of discontinuance of the business was 31st March, 1948, though at one time the department had contended that the discontinuance took place on 1st April, 1948. Thus, the old firm of Merwanji Kola & Co., continued under the same name and style despite these changes but from 1st April, 1948, a completely new firm came into being under the name and style of Romer Dadachanji Sethna & Co. On the discontinuance of business from 31st March, 1948, the firm of Merwanji Kola & Co. claimed exemption in respect of its income for the period between the end of the previous year and the date of its discontinuance of business under section 25(3) of the Indian Income-tax Act. So far as the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of April, 1931 NOW IT IS HEREBY AGREED by and between the parties hereto as follows : The second clause of the agreement says that the name and style of the said partnership shall be Merwanji Kola & Co. as before. The partnership was for five years certain from the 1st day of April, 1931, subject to the provisos with which we are not here concerned. Clauses 4 and 5 then provided as follows : "Clause 4 : The partnership shall buy and take over the furniture, fittings, safes, books, library and other movable property belonging to the parties hereto of the 1st, 2nd, 3rd and 4th parts (except outstandings) and lying at their office at 14-K, Hamam Street, in Fort, on the 1st day of April, 1931, at a valuation to be made by the partners. Clause 5 : All moneys required by the partnership as capital or for the purpose of buying the said property referred to in the foregoing clause or for carrying on the business of the partnership and meeting the expenses of the establishment, payment of counsel's fees, etc., shall be contributed from time to time by the parties in proportion to the shares which the parties are entitled to in the profits and losses of the said business." Clause 12 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he old firm and the partners agreed to contribute the capital of the company in proportion to the shares which each partner had. It was urged that these were all indications that the business of the old firm had ceased particularly since the partnership itself was dissolved by clause 5 of the instrument of partnership dated 11th November, 1931. The documents themselves make a distinction between the business carried on by the firm of Merwanji Kola & Co. and the firm. That is clear from clause 5 of the first partnership deed and from clauses 5 and 6 of the second partnership document. There is no provision in either of the two documents that the business of the firm shall cease. On the other hand, all the provisions that are made by the two partnership documents are with a view to ensuring that the business of the firm would be carried on and they provide for the transference of the same business to the new partnership. The provision has been made in clause 4 of the instrument of partnership dated 12th October, 1931, for the buying and taking over of the movable assets of the old partnership and in clause 5 for the provision of capital for carrying on the business of the old firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for the simple reason that the business was not discontinued though a completely different legal entity became its owner after the business was transferred to the new company. The learned Chief Justice at page 92 quoted with approval the remarks of Lord Justice Scrutton in Bartlett v. Inland Revenue Commissioners : "The answer to that appears to me to be very simple. The trade was not discontinued in the year. The trade was sold to a company and continued during the whole year ; and in my view, therefore, section 24 of the Act of 1907, has no application to this case." The equivalent provision in the English Act was section 24(3) of the Finance Act, 1907. The other learned judge, Mr. Justice Coyajee, pointed out at page 93 : "On the facts of this case it is clear that when the company sold the business, including the goodwill and the benefit of all running contracts, to the consolidated Mills Stores Co., Ltd., the ownership of the business was changed, but the business was not 'discontinued'." Reliance was placed on behalf of the department upon a decision of this court in In re Motichand and Devidas. The only similarity between the facts of that case and the present one is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case. None of these facts are present here. On the contrary, as we have shown, the two partnership documents by their very terms contemplate that the business of Merwanji Kola & Co. shall continue and be taken over by the new partnership which came into being from 1st April, 1931. In the light of these authorities and having regard to the circumstances which we have referred to above, we think that the decision of the Tribunal on the second question referred to us was a correct decision. As to the question of estoppel (the first question referred), reliance was placed upon a statement made in a copy of the grounds of appeal filed by the new firm on 26th March, 1933. In the facts stated at the head of the memorandum of appeal the following statement occurs in paragraph 3 : "The said firm was dissolved on the death of the said Mr. Merwanji Kaikhushru, and thereafter the business was continued by the remaining partners who, however, continued the share of Mr. Merwanji in the said firm till 31st March, 1931. The said firm was, therefore, finally dissolved on 31st March, 1931, and the new firm of Messrs. Merwanji Kola & Co. was formed with the partners mentioned in paragraph 1 he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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