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TMI Blog1983 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that no fresh deed of partnership had been executed on the demise of the said partner and no application for registration was filed for the remaining period. The ITO noted that the books of account were closed on the day when the accounting year ended, i.e.., on June 30, 1969, and the assessee had filed only one return for the whole period. The assessee claimed before the ITO that the profits or losses may be apportioned for the two periods, i.e., (1) from the date of commencement of the accounting year till the date of death of the partner, and (2) from the date of demise till the end of the accounting year. This contention did not find favour with the ITO who held that the profit or loss arose when the accounts were closed; and since no fresh partnership deed was executed, the firm was dissolved and the registration originally granted cannot be continued under s. 184(2) of the Act. The assessee took the matter in appeal to the AAC, who following the decision of the Andhra Pradesh High Court in CIT v. Sri Rama Talkies [1973] 87 ITR 615, held that the assessee-firm had been rightly assessed as an unregistered firm; and, therefore, dismissed the appeal. The assessee carried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is that the Tribunal has not addressed itself to the relevant aspects of the matter and has decided the question on facts which are not relevant and germane to the controversy. On behalf of the Revenue, it was urged that having regard to the agreement between the erstwhile partners as contained in clause 15 of the partnership deed, the firm would not stand dissolved by the demise of one of the, partners and the jural relationship amongst the surviving partners would continue subject to the right of the representative of the deceased partner to join the partnership firm; and, therefore, in the present, case there was no dissolution of the partnership, but there was merely a change in the constitution of partnership so far as the partners and their shares were concerned. In order to answer the question which has been referred to us, we may set out the relevant part of s. 184 so far as is material for the purpose of this reference. " 184. (7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year: Provided that: (i) there is no change in the constitution of the firm or the shares of the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued existence of the firm. It would, therefore, cover cases where a partner ceases to be a partner or a new partner is introduced in a firm. The change in the shares of partners of the firm would also result in a change in the constitution of the firm. On authority also, this position is well recognised. (See Addl. CIT v. Harjivandas Hathibhai [1977] 108 ITR 517 (Guj) at page 526). In the income-tax law also, the concept of a change in the constitution of a firm is interpreted on the same lines as in the partnership law, though s. 187 of the Act of 1961 clearly specifies as to what would amount to a change in the constitution of a firm. The meaning which has been given to this concept of change in the constitution of a firm under s. 187 is also applied while considering the question of continuous effect of registration once granted under s. 184(7) of the Act of 1961. (See The Law and Practice of Income-tax by Kanga and Palkhivala, seventh edition, volume I, page 1020). On a construction of s. 184(7) of the Act of 1961, the true effect is that registration once granted to any firm for any assessment year shall be continued to be effective for every subsequent year provided there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accounting period, we do not think that it would result, ipso facto, in the assessee being deprived of the benefit of registration even though the, partnership deed for continuance of the partnership in spite of the death as provided in the agreement might have been executed in the subsequent accounting year. We do not find any limitation as apprehended by the learned counsel for, the assessee in the pro forma which has been prescribed for obtaining registration in case of a change in the constitution of the firm. The requirement of the filing of form for obtaining registration is with a view to satisfy the ITO that there is a change in the constitution of the firm, inasmuch as provided in the partnership deed executed between the surviving partners and the deceased partner, the partnership has not been dissolved as a result of the demise and the firm has continued to be in existence with or without new partners. This fact is to be established not only from the point of view of the assessee but also from the point of view of the Revenue in order to enable the ITO to grant registration as provided in s. 184(8) of the Act of 1961. The fact of a change in constitution of the firm ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sought the question on the matter of dissolution of the firm, it is not entitled to argue that aspect of the question. In view of this contention advanced on behalf of the Revenue, we have thought it fit not to reframe the question. The next problem, as we have stated above, is whether the assessee-firm is dissolved or whether there is merely a change in the constitution of the firm. So far as the assessee is concerned, in the present case, it claims that the firm has been dissolved. It has, as a matter of fact, filed a declaration in Form No. 12 where it has been stated, inter alia, that there has been no change in the constitution of the firm or the shares of partners since the last day of the previous year relevant to the assessment year 1969-70 up to the date of demise of the partner, viz., April 7, 1979. In other words, the assessee-firm is claiming that the firm has been dissolved since the date of demise of the partner, Shivratan Mohatta. Now, that was precisely the problem which was to be answered in order to determine whether the assessee-firm was entitled to the benefit of continuance of registration which was granted to it in the earlier assessment years, because und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners would not dissolve the partnership and the jural relationship between the surviving partners may continue even after the death. The question whether, in a given case, there has or has not been an agreement may be decided on the proof in the form of an express declaration to that effect. It may be decided even on the basis of the conduct of the parties and other facts and circumstances of the case. The question as to whether the partnership has been dissolved or not is to be answered by the court by finding out whether the jural relationship between the parties who had agreed to share the profit and/or loss of business carried on by them had come to an end; and it can be inferred also from certain proved facts. (See Vazirbhai Sultanbhai Tamboli v. Gadmal Nathmal Marwadi [1940] 42 BLR 511 at page 512). Whether the firm is dissolved or not is a question to be answered with reference to the previous and particularly subsequent conduct of the partners in the absense of a regular deed of dissolution, since the subsequent conduct may be determinative of the fact as to whether the partners intended to terminate the jural relationship existing between them or not. (See Desa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion. The learned counsel for the Revenue, therefore, attempted to persuade us, that unless a specific question to that effect has been sought by the assessee as to whether the firm has been dissolved or not, it would not be open to the learned counsel for the assessee to agitate that question. We are afraid that this is too specious. The question whether the assessee-firm was entitled to the benefit of the continuity of registration or was required to apply for renewal of registration was a question which would depend on the determination of the question whether the firm was dissolved or not and/or whether there was only a change in the constitution of the firm. Unless that question is precisely answered, it would be difficult to determine the question whether the assessee-firm is entitled to the benefit available under s. 184(7) or s. 184(8), as the case may be. We do not think that it is necessary for the assessee to seek a specific question Since a question has been framed in general terms and referred to us for our advice. It is well settled that if a question of law is framed in general terms and in dealing with it several aspects fall to be considered, they have to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be of any assistance to the cause of the Revenue, since the finding of fact in that case was that the firm had been reconstituted as a result of a change in the constitution of the firm on account of the death of one of the partners, viz., Aswathanarayana on October 15, 1963, and admission of his widow, Mangamani, to the partnership and the execution of the new partnership deed as a result thereof. That is precisely the question which has to be found here; and unless that finding is recorded, we do not think that the basic and ultimate question can be answered. The result is that we are required to adopt the course suggested by the Supreme Court in CIT v. Indian Molasses Co. P. Ltd. [1970] 78 ITR 474, by declining to answer the question on the ground that the Tribunal has failed to consider and decide on correct principles the aspect of the s matter whether the firm has been dissolved or not and/or whether there was a change in the constitution of the firm. It will be open to the Tribunal to dispose of the appeal in the light of the observations made by this court after determining this aspect of the question which ought to have been decided. The reference is disposed of accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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