9911796707
TMI Blog1980 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) the ITO made the assessment on the assessee as a registered firm for the accounting period ending 31st July, 1975. The CIT initiated action under s. 263 of the IT Act, 1961 on the view that the ITO was in error in making a single assessment for the entire period instead of two assessments, one for the period 1st Aug., 1974 to 14th April, 1975 and the other for the period from 15th April, 1975 to 31st July, 1975. He over-ruled the contentions raised on behalf of the assessee before him. He passed an order under s. 263 on 14th April, 1980 by which he set aside the assessment order dt. 15th April, 1978 and directed the ITO to make two separate assessments for the aforesaid two periods. Aggrieved by this order of the CIT, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices of the employees and accordingly, the said amount was paid, that infact, out of 44 employees 19 remained in services of the firm even after payment, that this payment was made with a view to make the firm viable and economic unit and to improve its working conditions and that in these circumstances, the payment of retrenchment compensation would not justify the finding out the CIT that there was succession. The ld. counsel further made the submission that in regard to the development rebate, due to change in the auditors, a mistake had crept in and the same was rectified in the revised balance-sheet. Regarding the 'goodwill', the ld. counsel pointed out that it was not actually goodwill as understood in the general parlance, that was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r whether there was succession. By deed of Partnership dt. 2nd Nov., 1972 Shri S.M. Rama Krishna Rao, Shri S.M. Ganesh Rao and 18 others formed a partnership. Clause 21 of that deed provided that the death, insolvency or retirement of any partner shall not dissolve the partnership. W.e.f. 1st April, 1975 except the aforesaid two Shri S.M. Ramakrishna Rao and Shri S.M. Ganesh Rao, the remaining 18 partners retired from the firm. This is evidenced by a deed of retirement dt. 7th April, 1975. By deed dt. 7th April, 1975, 10 more partners were taken to the firm that remained with Shri S.M. Ramakrishna Rao and Shri S.M. Ganesh Rao, w.e.f. 1st April, 1975. cl. 17 of this deed provided that death, retirement or insolvency of any partner shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the two remaining partners formed in partnership with 10 other partners w.e.f.1st April, 1975 as evidenced by the deed dt. 7th April, 1975. Shri S.M. Rama Krishna Rao and Shri S.M. Ganesh Rao who were there in the firm under the deed dt.7th April, 1975. In other words, the above two partners who were partners of the firm before the change continued as partners after the change. Again there was another change as evidenced by the deed dt. 14th July, 1975 in which 10 partners who were partners under the deed dt. 7th April, 1975 continued to be partners i.e. the partners who were before the change continued as partners who were before the change continued after the change. Thus, it will be seen that after every change there were some common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts is untenable. In this view of the matter, it is not necessary for us to consider the other contention, raised on behalf of the assessee that the CIT cannot seek to revise the assessment while the order under s. 185 is left untouched. In the result, the order of the CIT is set aside and that of the ITO restored for the asst. yr. 1976-77. The appeal allowed. 6. Let us now take up the departmental appeal for the asst. yrs. 1971-72, 1972-73 and 1973-74. For the above asst. yrs., originally the ITO had allowed development rebate on new item of machinery. Later, on the ground that the partnership did not have the same constitution all through and that in the previous year relevant to the asst. yr. 1976-77, some partners have retired from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -sheet as on 31st July, 1975 originally, but found place only in the revised balance-sheet subsequently filed. He further submitted that the provisions of s. 187(2) defining the change in the constitution should be confined to the provisions of s. 187 only and it cannot be extended to the provisions of s. 155. In this connection, he referred to the ruling of the Mysore High Court in the case of Bharat Engineering Construction Co.(5) and Karupukula Suryanarayana Shetty Sons.(6) In reply, the ld. Counsel for the assessee pointed out that in the orders passed by the ITO withdrawing the development rebate, reference was made only to the plea of succession and not to the alleged meddling with the development rebate reserve. It was further po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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