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TMI Blog1997 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... firm got dissolved and the firm that came into existence subsequently is completely a new entity and that two separate assessments have to be made one in the case of the new firm, is sustainable in law ?" Question No. 2 as framed above does not appear to be correct and there is the omission of the words "and the other in the case of the old firm" in between the expressions "new firm" and "is sustainable in law" at the fag end of the question so framed. The omission has to be necessarily rectified and after rectification, question No. 2 is reframed as under : "Whether, on the facts and in the circumstances of the case, the Tribunal's view that consequent on the death of one of the partners, Shri Shyamlal Trivedi, on May 31, 1973, the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the internal audit party had pointed out that two separate assessments of the two firms were not in order, since there was only a reconstitution of the firm and hence the entire income for the period between November 6, 1972, and October 25, 1973, should be assessed in the hands of the existing firm. The Assessing Officer thus clubbed the income for the two periods in the reassessment. The Appellate Assistant Commissioner dismissed the assessee's appeals. On the assessee's further appeal, the Tribunal noted that the Income-tax Officer had made separate assessments on the two firms after due consideration of the assessee's applications in Form No. 12 and Form No. 11-A and the relevant partnership deeds. The internal audit p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 42. Under section 42(c) 'subject to contract between the partners a firm is dissolved by the death of a partner.' The legal position thus is that as far as the first partnership deed is concerned the first firm constituted thereunder will be dissolved by the death of a partner. However, as far as the second partnership is concerned it specifically provides that death or retirement shall not result in the dissolution of the firm. In this background, we may refer to the Madras High Court decision in Kaithari Lungi Stores v. CIT [1976] 104 ITR 160, in which the Madras High Court observed that a change in the constitution of a firm is different from the dissolution of the firm. If there is a contract to the contrary against the dissolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically provides that the partnership shall be governed by the provisions of the Indian Partnership Act, 1932. Therefore, there is no contract between the parties that the death will have the effect of the dissolution of partnership and in case of death occurring, the provisions of the Partnership Act shall govern the situation. Under section 42(c) of the Partnership Act, 1932, if death occurs, in the absence of a contract between the parties, the firm would automatically get dissolved. Such being the case, by the death of Shyamlal Trivedi on May 31, 1973, the firm consisting of the old partners would automatically get dissolved. It is also not in dispute that a new firm came into existence on May 31, 1973, itself. The new partnership had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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