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Judgment
The income tax Appellate Tribunal, Delhi, has referred the following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as ''the Act'') for opinion to this Court:
Whether, on the facts and in the circumstances of the case, the ld. Tribunal was, in law, justified in upholding the order of the D.C. (Appeals) who had directed the Assessing Officer to make two separate assessments for the two periods and not a single assessment, whereas in the circumstances of the case, there is not a succession, but a change of the constitution ?"
The dispute relates to the assessment year 1984-85.
The relevant facts in brief are as follows :--
The respondent-assessee, a partnership firm, filed two returns for the assessment year 1984-85 for two periods as one of its partners, Ghisa Ram retired with effect from 16-10-1983 and Smt. Bhagwati Devi wife of Ghisa Ram was taken as partner in the firm in place of Sri Ghisa Ram. A fresh partnership deed was executed on 16-10-1983. The assessee-firm took the plea that this partnership has come into existence on 16-10-1983. It claimed two separate assessments, one for the period 1-4-1983 to 14-10-1983 and another for16-10-1983 to 31-3-1984. The said claim was rejected by the Assessing Officer who took the view that this is a case of change of constitution of the firm. In appeal, the DC (Appeals) held that there should have been two separate assessments for the aforesaid periods. The said order was confirmed by the Tribunal.
We have heard Sri A.N. Mahajan, learned standing counsel for the department. None appeared on behalf of the respondent/assessee.
Section 187 of the Act deals with the change in the constitution of a firm. Sub-section (2) of section 187 provides that for the purposes of section 187, there is a change in the constitution of the firm, if one or more of the partners cease to be the partners or more new partners are admitted in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner of partners of the firm. In this view, Sri Ghisa Ram was replaced or substituted by his wife Smt. Bhagwati Devi, by taking Smt. Bhagwati Devi as partner. In view of section 187(2) no new firm is constituted and it is a case of change in the constitution of firm. In view of the above, we answer the aforesaid question referred to us in the negative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.