Commissioner of Income Tax vs B.D. Dal and Oil Industries

This reference u/s 256(1) of the income tax Act, 1961 (''the Act'') at the instance of the revenue is to answer the following questions of law relating to the assessment years 1976-77 and 1977-78 pertaining to the same assessee, namely:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing that separate assessments should be made for the broken periods 14-11-1974 to 5-6-1975 and 7-6-1975 to 3-11-1975 ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing that separate assessments should be made for the broken periods 4-11-1975 to 18-3-1976 and 20-3-1976 to 22-10-1976 ?"

Admittedly, there is a contract to the contrary as envisaged by section 42(c) of the Indian Partnership Act, 1932, to the effect that the partnership would not stand dissolved but shall continue with the remaining partners together with heir of the deceased partner. In the present case, one out of several partners died and the reconstituted firm was continued with the surviving partners together with the heirs of the deceased. Accordingly, there was no dissolution of the firm as a result of the contract to the contrary contained in the partnership deed. Such a case falls within the ambit of section 187(2) of the Act, since it is a case of a mere change in constitution of the firm and not of succession of one firm by another. This is the view taken by us in CIT v. Sri Krishna Re-rolling Mills [1989] 175 ITR 366 (Raj.) relying on an earlier decision of this Court in Commissioner of Income Tax Vs. Gharsana Beriwal Road Works, and the recent Supreme Court decision in Wazid Ali Abid Ali Vs. Commissioner of Income Tax, Lucknow, . Following these decisions, it must be held that it is a case governed by section 187(2) and, therefore, only one assessment was required to be made for the entire period.

Consequently, the reference is answered in the negative, in favour of the revenue and against the assessee by holding that the Tribunal was not justified in directing separate assessments to be made for the broken periods for both the assessment years. No costs.