9911796707
TMI Blog1997 (4) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 27 of the Agricultural Income-tax Act ("the Act" for short). Those orders were challenged before the Karnataka Appellate Tribunal in AIT Nos. 51 to 55 of 1986. The Tribunal, by its order dated December 30, 1986, held that under section 27 only the income received by the firm prior to its dissolution could be assessed even after its dissolution, that under that provision the firm could not have been assessed in respect of the dividends received subsequent to the dissolution. It, therefore, set aside the assessment orders. However, the Tribunal observed that the assessment of the firm could be reopened by the assessing authority to include the income derived subsequent to the dissolution and reassess the income of the firm. After the passing of that order section 26 of the Act came to be amended by the Karnataka Act No. 10 of 1987. Section 13 of that amendment Act contained a provision regarding validation of the orders made earlier. The first respondent wrote a letter, annexure-C, to the Manager, Syndicate Bank, demanding payment of tax which had earlier been assessed in respect of the firm on the ground that in view of the amendment Act the order of the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. " In these cases it is not disputed that at the time when the assessment orders were passed or the notices to file the returns were issued, the firms had ceased to exist. The question that requires consideration is whether section 26(4) as amended by Act 10 of 1987 or section 27 empowers the authority to pass an order of assessment against the dissolved firm in respect of certain income derived after the date of dissolution, though that income is relatable to the supply made by the firm when it was in existence. The relevant provisions read as hereunder : " 26. (4) Where any business through which agricultural income is received is discontinued in any year, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the person who carried on the business had such sum been received before such discontinuance. 27. (1) Where the business of a firm or association of persons is discontinued or such firm or association is dissolved, the Agricultural Income-tax Officer shall make the assessment of the agricultural inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the dissolution that income would not be the income of the firm as the firm would no longer be in existence. The object of section 27(1) is to empower the Officer to assess the income of the firm which accrued prior to its dissolution even though by the time of the assessment, the firm has stood dissolved. The fiction cannot be extended to a case where the income is received after the dissolution of the firm by the erstwhile partners. In George Talkies Circuit v. CIT [1988] 171 ITR 386, a Division Bench of the Rajasthan High Court was dealing with section 189(1) of the Income-tax Act which is in pari materia with section 27 of the Act. Interpreting that provision, the High Court has held as hereunder : " It is clear from the above-quoted provisions that despite the dissolution of the firm on account of its insolvency, it continued to be a subsisting firm under the Income-tax Act for the purpose of assessment of the total income of the firm till the date of its dissolution. They contain deeming provisions for the continuance of the dissolved firm for this limited purpose." Section 30(2) of the Act, which is on similar lines as that of section 27, reads as hereunder : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aka Appellate Tribunal and it is on that ground the assessment orders were set aside. The next point to be considered is whether section 26(4), as amended by Act 10 of 1987, could be of any help to the respondent. Learned counsel for the petitioners contended that section 26(4) applies only to a case of discontinuance of the business and not to a case of dissolution of the firm, that section 27 makes a distinction between discontinuance of a business and dissolution of the firm, and that as such section 26(4) does not apply to a case of dissolution of the firm. It is no doubt true that discontinuance of business need not necessarily imply dissolution of the firm. A firm may continue to exist but may discontinue carrying on a particular business. But where a firm is dissolved it necessarily involves discontinuance of business. As such it cannot be said that section 26(4) cannot be applied as it does not refer to dissolution of the firm, but what we are concerned with is as to whether this provision creates any legal fiction regarding the continuance of the firm notwithstanding its dissolution for purposes of assessing an income received after the dissolution. All that this provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
