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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 ..... 8, 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 the facts and in the circumstances of the case, the assessment for both the periods was justified in view of the provisions of section 187(2) of the Income-tax Act, 1961 ? " The main contention of the learned counsel for the assessee is that the provisions of section 188 of the Income-tax Act, 1961, are applicable to the facts of the present case as, according to the learned counsel, the firm of which Ram Rattan, deceased, was a partner stood dissolved in view of the provisions of section 42(c) of the Indian Partnership Act, as there was no provision in the partnership deed providing that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 assessees, who are liable to pay the income-tax, do not escape their liability in different eventualities. It is conceded by the learned counsel for the assessee that, where the provisions of the Income-tax Act are clear, no other enactment has to be taken into consideration while considering the liability of the assessee. In this view of the matter, the provisions of the Partnership Act can only be referred to if it is found that a particular situation is not covered by the provisions of the Income-tax Act. Though a particular firm, in view of the provisions of section 42(c) of the Indian Partnership Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 not the present case. In Commissioner of Income-tax v. Kirkend Coal Co., the Supreme Court relied upon the observations made in Shivram Poddar v. Income-tax Officer, Central II, Calcutta, wherein their Lordships of the Supreme Court, while examining the scheme of section 44 (before it was amended by the Finance Act of 1958) and it inter-relation with the provisions of section 26(2), etc., observed as under: " Where the firm is dissolved, but the business is not discontinued, there being a change in the constitution of the firm, assessment has to be made under section 26(1), and if there be succession to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 death, there was dissolution of the partnership in view of the provisions of the partnership deed, and by a new partnership deed, wherein Mohinder Lal, son of R. B. Mohan Lal, was brought in as a partner, a new partnership came into existence. This contention was not accepted by the learned judges and was repelled. It was held that irrespective of the fact that there was change in the partners of the firm four times including that on the death of one of its partners, R. B. Mohan Lal, the firm remained the same entity. Similar view was taken by the Allahabad High Court in R. B. Jessa Ram Fateh Chand v. Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 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 provided sub-section (2) of section 187 wherein the definition of the words "change in the constitution of a firm" as referred to in sub-section (1) of section 187 has been given. In a particular case which answers the description of sub-section (2) of section 187, it will be considered to be a change in the constitution of the firm within the meaning of section 187(1). Therefore, this authority is of no avail to the learned counsel for the assessee. As regards the case Commissioner of Income-tax v. A. W. Figgies and Company, the same is also not of any relevance to the facts of the present case. In that case a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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