COMMISSIONER OF INCOME-TAX VS MADHAVDAS LALCHAND
1999 P T D 3597
[230 I T R 877]
[Madras High Court (India)]
Before K.A. Thanikkachalam and N. V. Balasubramanian, JJ
COMMISSIONER OF INCOME-TAX
Versus
MADHAVDAS LALCHAND
Tax Case No-.990 of 1984 (Reference No.886 of 1984), decided on 22/07/1996.
Income-tax---
----Firm---Assessment---Death of partner---Partnership deed stating that it would be governed by provisions of Partnership Act---Firm was dissolved on the death of a partner---Two assessments to be made---Indian Income Tax Act, 1961, S.187---Indian Partnership Act, 1932, S.42.
There was a partnership constituted by a deed, dated October 31, 1959, wherein it was stated that it would be-governed by all the provisions of the Indian Partnership Act. Under section 42 of the Partnership Act, 1932, subject to a contract to the contrary, a firm is dissolved by the death of a partner. On July 17, 1972, a partner died. A fresh deed was drawn up on July 21, 1972. The Tribunal held that there was a dissolution of the firm on the death of a partner and consequently separate assessments had to be made for the period up to the date of death and the period after the date of death during the previous year for the assessment year 1973-74. On a reference:
Held, that there was no clause in the original partnership deed for the continuation of the firm. After the death of one of the partners, the firm was again reconstituted under a separate deed, dated July 21, 1972. Therefore, there was no question of continuation of the original firm. The Tribunal was justified in directing two assessments to be made for the assessment year 1973-74.
CIT v. Empire Estate (1996) 218 ITR 355 (SC) fol.
C.V. Rajan for the Commissioner.
Nemo for the Assessee.
JUDGMENT
K.A. THANIKKACHALAM, J.---In compliance with the order of this Court, dated April 6, 1983, the Tribunal referred the following question for the opinion of this Court under section 256(2) of the Income Tax Act 1961:
"Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 187(2) of the Income-tax Act, the Appellate Tribunal was justified in law in holding that consequent to the death of one of the partners, on July 17, 1972, there was dissolution of the old firm and hence two separate assessments have to be made one for the period up to July 17, 1972, and the other for the subsequent period for the assessment year 1973-74?"
The point for consideration is, having regard to the provisions of section 187(2) of the Income-tax Act, the Appellate Tribunal was justified in law in holding that consequent to the death of one of the partners on July 17, 1972, there was dissolution of the old firm and hence two separate assessments have to be made one 1'or the period up to July 17, 1972, and the other for the subsequent period for the assessment year 1973-74.-There was a partnership constituted by a deed, dated October 31. 1959, wherein it is stated that it will be governed by all the provisions of the Indian Partnership Act, 1932. Under section 42 of the Partnership Act, subject to contract to the contrary, a firm is dissolved by the death of a partner. On July 17, 1972, a partner died and since there was no contract to the contrary, it was found that the partnership stood dissolved and a new partnership firm was constituted by a fresh deed; dated July 21, 1972. The case of the Revenue was that from the conduct of the parties it must be inferred that there was in fact no dissolution. But the Tribunal found that the question of gathering the intention by the conduct of the parties would not arise when there was an express contract in the agreement and the partnership being one at will, the death of the partner automatically brought it to an end. It was also found that the subsequent conduct of the surviving partners will be irrelevant to ascertain the existence of an agreement between a surviving partner and the deceased to continue the business. Hence, the Tribunal found that there was a dissolution of the firm on the death of a partner and consequently separate assessments had to be made for the period up to the date of death and the period after the date of death during the previous year for the assessment year 1973-74.
In the present case, there is no clause in the original partnership deed for the continuation of the firm. When there is a written contract, it is not possible to substitute any clause to the written contract by an oral agreement since the written contract can be varied only by another written -contract. It further remains to be seen that after the death of one of the partners, the firm was again reconstituted under a separate deed, dated July 21, 1972. Therefore, there is no question of continuation of the original firm in the present case.
A similar question came up for consideration before the Supreme Court in the case of CIT v. Empire Estate (1996) 218 ITR 355 wherein the Supreme Court held that the case of the assessee did not fall within the expression "change in the constitution of the firm" under section 187 and, therefore, the Tribunal was correct in directing the Income-tax Officer to make two assessments, one for the period from June 1, 1973, to January 12, 1974, and another for the period from January 13, 1974, to June 30, 1974, as the assessee's case did not fall within the provisions of section 187(2) of the Act.
Thus, considering the facts arising in this case, in the light of the judgment of the Supreme Court cited supra and looking into the provisions of section 42 of the Indian Partnership Act, we hold that there is no infirmity in the order passed by the Tribunal directing to make two separate assessments for the assessment year under consideration since there was no continuation of the original partnership on the death of one of the partners especially when there is no clause for continuation of the old firm. Accordingly, we answer the question referred to us in the affirmative and against the Department. No costs.
M.B.A./3143/FC???????? ?????????????????????????????????????????????????????????????????????? Order accordingly.