Commissioner of Income Tax vs Ganesh Jain Bhojanalaya and Pyarelal Bhagwat Prasad

Income Tax Reference No. 75 of 1983 :

This reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue is to decide the following question of law, namely :

"Whether, on the facts ^nd in the circumstances of the case, the Tribunal was right in holding that provisions of Section 187(2) were not applicable ?"

The relevant assessment year is 1977-78. The material facts are these. A partnership firm known as Ganesh Jain Bhojanalaya, Beawar, consisted of four partners, out of whom one, namely, Chandmal, expired on August 1, 1976, during the relevant period. A new firm was constituted with effect from August 2, 1976, and a new partner, Manakchand, was inducted into the firm. The assessee filed two returns, one up to August 1, 1976, and the other for the period commencing from August 2, 1976. The Income Tax Officer clubbed the income of the two periods and made one assessment resorting to Section 187(2) of the Act treating it as a case of a mere change in the constitution of the firm. The assessee''s appeal to the Appellate Assistant Commissioner was allowed holding that two assessments were to be made for the two periods, one up to August 1, 1976, and the other commencing on August 2, 1976. The Tribunal has affirmed the Appellate Assistant Commissioner''s view by rejecting the Revenue''s appeal. Hence, this reference at the instance of the Revenue.

The present is a case governed by the amended Section 187 as it stands after the insertion of the proviso in Sub-section (2) of Section 187 retrospectively with effect from April 1, 1975. The view taken in such a situation on the basis of the newly inserted proviso in Sub-section (2) of Section 187 by this court in Commissioner of Income Tax Vs. Assumal Veerumal, is that it is a case of succession governed by Section 188 of the Act and not of a mere change in the constitution of the firm to which Section 187 applies. Following that decision, it is to be held that the Tribunal''s view is justified.

Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified.

No costs.

Income Tax Reference No. 39 of 1985 :

This reference, u/s 256(1) of the Income Tax Act, 1961, at the instance of the Revenue is to decide the following question of law, namely :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that it was not a case of change in the constitution of the firm u/s 187(2) of the Income Tax Act, 1961, and consequently, in directing the Income Tax Officer to make two assessments for the two periods ?"

The relevant assessment year is 1980-81. The material facts are these.

The firm comprised three partners out of whom one Bhagwat Prasad died on January 17, 1980, and under a new partnership deed dated January 23, 1980, which became operative from January 18, 1980, a new firm was constituted by the remaining partners along with the widow of the deceased. The assessee filed two returns and claimed two separate assessments during the relevant period. The Income Tax Officer rejected the contention taking the view that it was a case of a mere change in the constitution of the firm. The assessee''s appeal was allowed and the Tribunal has affirmed that view on further appeal by the Revenue. Hence, this reference at the instance of the Revenue.

The present is a case governed by the amended Section 187 as it stands after insertion of two provisos in Sub-section (2) of Section 187 retrospectively with effect from April 1, 1975. The view taken in such a situation on the basis of the newly inserted proviso in Sub-section (2) of Section 187 by this court in Commissioner of Income Tax Vs. Assumal Veerumal, is that it is a case of succession governed by Section 188 of the Act and not of a mere change in the constitution of the firm to which Section 187 applies. Following that decision, it is to be held that the Tribunal''s view is justified.

Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified.

No costs.