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Judgment
We have heard learned Standing Counsel for the Income Tax Department and Sri Subham Agrawal, learned Counsel for the assessee.
The following questions have been referred in this reference:
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that the old firm stood dissolved with effect from 1st April, 1981 and in not accepting the revenue''s contention that there was only a change in the constitution of the firm.
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that two separate assessment should be framed?
It appears that the contention of the assessee was that the partnership was "at will". One of the partners Sri H.K. Agrawal gave a notice declaring his intention to dissolve the firm with effect 1.4.1981. In these circumstances, it has been held by the Tribunal that the old firm stood dissolved with effect from 1.4.1981. This view of law is absolutely in accordance with the Partnership Act read with agreement between the partners, relating to the o d partnership. We may mention here that it is not the case of revenue that the Partnership was not at will. Learned Counsel for the revenue has relied upon Sections 187 and 188 of the Income Tax Act. We have read the provisions repeatedly and we do not find the same to be inconsistent with, or overriding the fundamental law laid down by the Partnership Act, namely that a partnership at will stands dissolved upon notice of declaration by any partner.
Learned Counsel for the Revenue has relied upon the decision of a Division Bench of this Court on 16. 2.2005 in Income Tax Reference No. 143 of 1991 Thai decision does not deal with the situation where the old partnership was "at will," and where any partner had either died or had given notice of dissolution. Therefore, the said decision has no application in the present case. We accordingly hold in answer to the question No. 1 that the Tribunal was correct in holding that the old firm stood dissolved with effect from 1.4.1981. Our answer to question No. 2 accordingly is that the Tribunal was correct holding that two separate assessments should be framed.
Reference answered accordingly.