The relevant assessment year is 1969 70, the companyresponding previous year being Samvat year 2024, that is, November 3, 1967, to October 21, 1968.
12 for declaration regarding the companytinuance of the firm as well as an application for registration under Form No.
The major partners, namely, Raichand Chunilal Daxini and Chaturdas Nihalchand Tanna who were the major partners in the old firm, agreed to dissolve the firm and that agreement of the two partners in the firm which was a partnership at will, as pointed out by the deed of partnership dated June 24, 1963, annexure J to the statement of the case, and in view of the recital in the deed of partnership dated January 24, 1968, annexure L to the statement of the case, it is obvious that the major partners of the said firm had agreed to dissolve the old firm and the same partners, along with Amritlal Nihalchand, who had in the meantime attained majority, agreed to start the new firm with effect from January 23, 1968.
Along with the returns, an application in Form No.
share as a partner, Pratapbhai Sagalchand retained his benefits of the partnership to the extent of 37 1/2 per cent.
24,147.
11 had been sent.
and another minor, Mahesh Kumar Prabhudas, with a share in the benefits of the partnership to the extent of 10 per cent.
For the assessment year 1969 70, the firm had filed two returns of income for two periods falling within Samvat year 2024 relevant to the assessment year 1969 70.
Thereafter, at the instance of the assessee, the questions hereinabove set out have been referred to us for our opinion.
The new firm also took over all the debts and liabilities together with the stock and tenancy rights of the old firm.
It had two partners, Raichand Chunilal Daxini and Chaturdas Nihalchand Tanna.
In this case, the original deed of partnership was executed on June 24, 1963, and, under this deed, the partnership was said to have companye into existence with effect from April 15, 1963.
In the new partnership firm which came into existence, Raichand Chunilal retained his original share of 25, Chaturdas Nihalchand got 7.5 per cent.
The facts leading to this reference are as follows.
The second return was for the period January 23, 1968, to October 21, 1968, showing a total income of Rs.
The Income tax Officer was of the view that the new firm had taken over the business of the old firm as a going companycern and even though the income tax liabilities of the old firm were payable by the partners of the old firm, the tax payable by that firm was actually debited to the profit and loss account of the new firm.
In the old firm, the shares of the partners were Raichand Chunilal 25 Chaturdas Nihalchand Tanna 22 1/2 Amritlal Nihalchand Tanna 15 share in the benefits of the partnership Pratapbhai Sagalchand 37 1/2 share, he also being a minor.
It is the case of the assessee that, with effect from January 22, 1968, the old firm was dissolved and the business of the old firm was taken over by another firm of the same name, namely, Messrs. Amritlal Nihalchand.
Amritlal Nihalchand got 20 per cent.
It appears that a new deed of partnership was executed on January 24, 1968, by the three adult partners of the new firm, namely, Raichand Chunilal Daxini, Chaturdas Nihalchand Tanna and Amritlal Nihalchand Tanna and the partnership deed stated that the old partnership firm was dissolved by the partners with effect from the end of January 22, 1968, and the new firm was companystituted with effect from January 23, 1968.
The first return was for the period from November 3, 1967, to January 22, 1968, showing an income of Rs.
Against the decision of the Income tax Officer, the assessee took the matter in appeal and the Appellate Assistant Commissioner accepted the companytention of the assessee regarding the dissolution of the old firm and held that the Income tax Officer had erred in clubbing the income for both the periods together and directed the Income tax Officer to make separate assessments in respect of these two periods.
In this original partnership which is also referred to as the old firm, two minors, Amritlal Nihalchand Tanna and Pratapbhai Sagalchand Chandan, were admitted to the benefits of the partnership.
Against the decision of the Appellate Assistant Commissioner, the matter was taken in appeal before the Income tax Appellate Tribunal by the Revenue.
He also passed an order under Section 185 of the Income tax Act, 1961, granting registration to the new firm for the assessment year 1969 70.
It may also be mentioned that intimations that the old firm was dissolved and the new firm had been brought into existence were sent to the Registrar of Firms functioning under the Indian Partnership Act and also to the Income tax Officer.
Under these circumstances, the firm filed two returns for the two separate periods, namely, from the companymencement of the Samvat year, that is, November 3, 1967, to January 22, 1968, so far as the old firm was companycerned and the other return being for the period January 23, 1968, to October 21, 1968, for the period in which the new firm had functioned as a business entity.
70,251.
The firm was carrying on business in the name of Messrs. Amritlal Nihalchand.
In the recital clause in the new partnership deed in terms, it was mentioned that, with effect from January 22, 1968, the old partnership business was closed, the old partnership firm was dissolved and brought to an end and all its rights, liabilities, stock, tenancy rights and the right to use the name of the firm had been taken over by the new firm in which there were three adult partners and the partnership deed of January 24, 1968, mentioned that the new firm had companymenced business with effect from January 23, 1968.
was admitted to the benefits of the partnership.
The assessee firm is a registered partnership firm and it deals in cloth.
Amritlal Nihalchand Tanna attained majority on June 23, 1968.
share instead of 22 1/2 per cent.,
Whether, on the facts and in the circumstances of the case, the decision reached by the Tribunal, namely, that the income for the two periods November 3, 1967, to January 22, 1968, and January 23, 1968, to October 21, 1968, was required to be clubbed and assessed as a whole for the assessment year 1969 70 was companyrect in law ?
J. Divan, C.J. In this case, at the instance of the assessee, the following two questions have been referred to us for our opinion Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was a change in the Constitution of the firm within the meaning of the said expression under Section 187 of the Income tax Act, 1961, and, accordingly, the provisions of Section 188 were number applicable ?
