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TMI Blog1983 (9) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal formulation have been set out in the statement of facts and may briefly be summarised as follows: One Sri A. Ramakrishna Rao, and three of his brothers were running a lodging and boarding business in partnership at Mahatma Gandhi Road, Bangalore, under the name and style of Sri Durga Enterprises, Bangalore'. It was under a partnership deed dated June 20, 1967. This deed was reconstituted with effect from April 1, 1971, by the addition of one more partner called A. Prabhakar Rao, and the new partnership was evidenced by a deed dated April 2, 1971. This partnership continued its business till it was dissolved by a deed dated November 1, 1974. The dissolution took place with effect from October 31, 1974. The terms of the said disso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected the ITO to redo the assessment. The assessee went up in appeal before the Tribunal. The Tribunal, largely depending upon the decision of the Madras High Court in Mavukkarai (NV.) Estate Tea Factory v. Addl. CIT [1978] 112 ITR 715, held that the case of the assessee called for two assessments. It has observed that the terms of the said dissolution deed indicated that at least for a moment the business of the earlier firm had become proprietary in the bands of the single partner, Sri Ramakrishna Rao, and it was only thereafter that the new firm of partnership was constituted. The Tribunal set aside the order of the Commissioner and restored that of the ITO holding that the case of the assessee was governed by s. 188 and not by s. 187. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of a firm under the law of partnership and a new firm takes over the business of the dissolved firm, it is true that under the general law of partnership the old firm cannot be regarded as being reconstituted. But the legal position of a firm under the Income-tax law is different from that under the general law of partnership in several respects. It is not necessary to employ any particular words or phraseology like 'deemed to be' to provide that a firm which is regarded as dissolved under the general law of partnership, shall be regarded as being merely re-constituted under the law of income-tax in certain circumstances. As regards the objection that section 187 could not have intended to treat a firm which, as a matter of fact, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities of this business. " This clause is fatal to the contention of the learned counsel. What was taken as the assets and liabilities of the newly constituted firm was 'not the share of Sri Ramakrishna Rao in the dissolved firm, but the assets and liabilities of the entire business of the earlier firm. There was thus a continuance of the business although the partners were changed. One partner at least was common in both the firms. The case, therefore, clearly falls within the ratio of the decision of this court in Shambulal Nathalal's case. In the result, we answer the question in the negative and in favour of the Revenue. In the circumstances, the parties shall pay and bear their own costs. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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