COMMISSIONER OF INCOME-TAX VS G. DALABHAI & COMPANY
1999 P T D 1564
[226 I T R 922]
[Gujarat High Court (India)]
Before R. K. Abichandani and Rajesh Balia, JJ
COMMISSIONER OF INCOME-TAX
Versus
G. DALABHAI & COMPANY
Income-tax Reference No.400 of 1983, decided on 09/12/1996.
Income-tax---
----Firm---Assessment---Death of partner---Two separate assessments to be made for periods before and after death of partner---Indian Income Tax Act, 1961,S.185.
Where one of the partners of the assessee-firm died on April 26, 1974, and in his place his widow was taken as partner from the next day:
Held, that it is a fundamental principle of the law of partnership that unless there is a contract to the contrary, the death of a partner results in the dissolution of the firm and so two separate assessments had to be made, one for the period covering up to April 26, 1974, and the other for the period from April 27, 1974, to March 31, 1975.
CIT (Addl.) v Harjivandes Hathibhai (1977) 108 ITR 517 (Guj.) and Wazid Ali Abid Ali v. CIT (1988) 169 ITR 761 (SC) fol.
M.J. Thakore for Manish R. Bhatt for the Commissioner.
D.A. Mehta, R.K. Patel and B.D. Karia for K.C. Patel for Respondent No. 1.
JUDGMENT
RAJESH BALIA, J.---At the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal, Ahmedabad Bench "C", has referred the following question of law arising out of I.T.A. No.414/Ahd of 1982 for the assessment year 1975-76:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has been right in law in confirming the view taken by the Commissioner of Income-tax (Appeals) that on the death of Shri Dalabhai Veribhai on April 26, 1974, the old partnership firm was dissolved and consequently two separate assessments were required to be made first for the period covering up to April 26, 1974, and second for the period from April 27, 1974, to March 31, 19759"
The question has arisen in the following circumstances. One of the partners of the assessee-firm died on April 26, 1974, and in his place his widow was taken as partner from the next day. The assessee claimed that a new firm came into existence from April 27, 1974, and so two separate assessments should be made, one for the period up to April 26, 1974, and another for the period following. The Income-tax Officer rejected this claim but the Commissioner of Income-tax (Appeals), applying the decision of this High Court in the case of Addl. CIT v. Harjivandas Hathibhai (1977) 108 ITR 517, allowed the appeal of the assessee. The Tribunal confirmed this order.
It is the fundamental principle of the law of partnership that unless there is a contract to the contrary, the death of a partner results in the dissolution of the firm immediately though settlement of accounts may be taken later. That principle has been applied by this Court in Harjivandas Hathibhat's case (1977) 108 ITR 517.
Learned counsel for the Revenue also does not dispute this position of law. The Supreme Court has subsequently taken the same view in the case of Wazid Ali Abid Ali v. CIT (1988) 169 ITR 761. It is not a case where any contract to the contrary has been found to exist. In view of the aforesaid, the question referred to us must be answered in the affirmative, in favour of the assessee and against the Revenue and we do so. Accordingly, the reference stands disposed of with no order as to costs.
Before parting with the case, we notice with anguish the language used by the Income-tax Officer in his assessment order saying that "With due respect to the decision of the Gujarat High Court, I do not follow the same". The Income-tax Officer in not following the decision of the Gujarat High Court within whose supervisory territory he was functioning, is far from satisfactory, that is the least we can say. The minimum decorum of the system of hierarchy that Tribunals in the administration of justice and their judicial subordination to the High Court of the territory in which the function requires that they restrain in the use of proper expression while following or not following the decision of the High Court.
M.B.A./1982/FC Reference answered.