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TMI Blog1973 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Ram Rattan died on June 6, 1966. There was no provision in the partnership deed for the continuance of the partnership in the event of death of any partner and, therefore, it is pleaded by the assessee that, in view of the provisions of section 42(c) of the Indian Partnership Act, the firm stood dissolved on June 6, 1966. On June 9, 1966, a new partnership was formed between Sat Dev and Dharam Pal, partners of the dissolved firm, and Shri Sham Lal, son of the deceased partner, Shri Ram Rattan. Two returns were filed for the assessment year 1967-68, the first for the period from December 18, 1965, to June 8, 1966, and the second for the period from June 9, 1966, to March 31, 1967. The Income-tax Officer, while assessing, vide his order dated March 13, 1968, clubbed the income of the two firms and passed a single assessment order holding the view that it was a case of a change in the constitution of the firm. The appeal filed by the assessee before the Appellate Assistant Commissioner failed and, similarly, the second appeal filed before the Tribunal also having failed, this reference was made to this court at the instance of the assessee, in the following terms : "Whether, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144 it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment : Provided that- (i) the income of the previous year shall, for the purposes of inclusion in the total incomes of the partners, be apportioned between the partners who, in such previous year, were entitled to receive the same ; and (ii) when the tax assessed upon a partner cannot be recovered from him, it shall be recovered from the firm as constituted at the time of making the assessment. (2) For the purposes of this section, there is a change in the constitution of the firm- (a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances, that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change ; or (b) where all the partners continue with a change in their respective shares or in the shares of some of them." Lastly, section 189 of the Act deals with the dissolved firms. The purpose of enacting these provisions by the legislature is to provide for all exigencies so that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of his death and his son, Sham Lal, was entered as a new partner in his place. The other two partners, as one partner ceasing to be a partner on account of his death and another partner entering into partnership, this answers the description of sub-section (2) of section 187 of the Act and it has been rightly held by the authorities below that this constituted a change in the constitution of the firm. The contention that the previous firm as a legal entity, came to an end on the death of Ram Rattan and a new firm came into existence by the joining of Sham Lal loses sight of the fact that, for the purposes of the Inocme-tax Act, this will be considered to be a change in the constitution of the firm as when dealing with the matters under the Income-tax Act, as to whether a particular case is a change in the constitution of the firm or not, the ingredients of sub-section (2) of section 187 of the Act have to apply. A particular case can only be covered by section 188 of the Act when it is a succession of one firm by another, meaning thereby that there is a complete change and no one of the partners in the previous firm continue to be a partner in the latter firm, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Hoshiarpur form the very beginning right down to the purchase by the Punjab Government, and it continued to be the same unit throughput, carrying on the same business of supply of electricity at the same place and there was no cesser of that business or any change in the unit. Therefore, it was held that the petitioner-firm was liable to be assessed to tax under the second proviso to section 10(2)(vii) in respect of depreciation allowed to it right form its inception in 1930. It may be pointed out that there was change in the partnership of the said firm on various dates. The first change was that one of the three partners of the firm, Balmokand, dropped out and subsequently two new partners were taken in the partnership. R. B. Mohan Lal, a partner of the firm, died subsequently, and his minor son, Mohinder Lal, was given the benefits of the partnership under the guardianship of his mother and a partnership deed was drawn up. In this context it was argued by the counsel for the firm that at the time of the death of R. B. Mohan Lal, the previous partnership deed had no clause that the partnership would continue on the death of a partner and, therefore, it was pleaded that, on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, the provisions of section 187 of the Income-tax Act are attracted and, therefore, the present case cannot be covered by the provisions of section 188 of the Act. Before I part with the judgment, the authorities referred to by the learned counsel for the assessee may be referred to. As regards the decision of the Calcutta High Court in In re Moolji Sicka, suffice it to say that the said decision is not at all helpful for the purposes of the present case. The learned judges of the Calcutta High Court were considering the meaning of the words " change in the constitution of a firm " as provided in section 26(1) of the Income-tax Act, 1922, In that case there was only a change in the apportionment of the shares of the partners and the question before the Bench was whether such a change in the shares of the partners amounted to a change in the constitution of the firm and it was held keeping in view the provisions of the Partnership Act that there was no change in the constitution of the firm within the meaning of section 26(1) of the Income-tax Act, 1922. It is quite apparent that in enacting the Income-tax Act, 1961, the legislature has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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