9911796707
TMI Blog1992 (3) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer to frame two separate assessments for the periods April 1, 1977, to October 10, 1977 and October 12, 1977, to. March 31, i978? The assessee is a firm. The dispute relates to the assessment year 1978-79 with the relevant previous year ending on March 31, 1978. At the inception of the previous year to the assessment year in question, the firm consisted of two partners, viz., Ram Bilas and Prem Kumar. In the midst of the relevant previous year, i.e., October 9, 1977, one out of the two partners died. Three days thereafter, on October 12, 1977, the lone surviving partner joined hands with one Sushil Kumar. A fresh deed of partnership was drawn up to carry on the business of the firm under the same name and style under which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituted at the time of making the assessment. The import of the expression, " change in the constitution of the firm " for the purposes of section 187 is defined in sub-section (2) of section 187, vide its clauses (a) and (b). For this case, clause (a) alone is relevant. It says that there would be a change in the constitution of the firm, 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. There is also a proviso attached to sub-section (2) of section 187. The said proviso reads: " Provided that nothing contained in clause (a) shall apply to case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two firms are common. In the present case, the old firm was constituted by two partners. One of them died and there was no stipulation in the partnership deed that the firm shall not stand dissolved on the death of a partner. Even if there had been such a stipulation, the firm could not have been saved from dissolution, because, after the death of J., only one partner was left and one man cannot constitute a firm, and the firm automatically came to an end. Since the erstwhile firm stood dissolved on the death of one of the partners, the petitioner-firm which took over the same business could be assessed only in accordance with section 188 and a single assessment for the whole year was not valid. " In another Full Bench decision in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute a succession under the said provisions, there is no legal requirement that any partner of the old firm should not be a partner in the new firm. Likewise, when a dissolved firm is succeeded by another firm in which some of the partners of the old firm are members, nothing in section 187(2) converts such a case of "succession" into a case of change in the constitution of the firm ". This legal position, in our opinion, admits of no doubt and is indeed, clearly spelled out because of the contingency provided in the proviso to sub-section (2) of section 187 of the Act, apart from the fact that this position also obtains on the correct interpretation of the provisions contained in section 188 of the Act. The proviso aforesaid envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a contract to the contrary, the surviving partners will continue the firm. On the other hand, if one of the two partners of a firm dies, the firm automatically comes to an end and, thereafter, there is no partnership for a third party to be introduced therein and, therefore, there is no scope for applying clause (c) of section 42 to such a situation. It may be stated that pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would constitute a new partnership." From the above, it follows that on the death of one out of the two partners which constituted the erstwhile firm, the firm stood automatically dissolved. That apart, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
