Frontier Eggs Store vs Commissioner of Income Tax

D.S. Tewatia, J.—The Tribunal has referred the following question of law for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 25,930 was exigible to tax u/s 4 of the Income Tax Act, 1961, in the hands of the assessee-firm for the assessment year 1974-75 ? "

To appreciate the abovesaid question, the following few facts deserve notice :

Messrs Frontier Eggs Store, Ambala Cantt., came into existence as a result of a partnership deed dated November 2, 1965. This firm entered into a contract with the Army authorities for supplying of eggs. There was a breach of contract and the dispute arising out of this breach was, therefore, referred to an arbitrator, who found that a sum of Rs. 26,000 was to be paid to the assessee, vide his award dated June 17, 1971. His award was made rule of the court on January 30, 1973, and the amount of Rs. 26,000 was paid to the assessee-firm on October 9, 1973.

The assessee-firm in the present form came to be reconstituted as a result of a partnership deed dated April 1, 1972.

The question that fell for consideration is as to whether this amount which had been received by the assessee-firm is to be taxed in the hands of the old firm or in the hands of the reconstituted assessee-firm ?

The assessee-firm being the incarnation of the old firm as a result of reconstitution with one of its old partners, Sh. Pera Ram, as a continuing partner, as held by the Full Bench of this court in Nandlal Sohanlal, Jullundur Vs. The Commissioner of Income Tax, Patiala, it is the assessee-firm in whose hands the amount is exigible to tax by virtue of Section 187 of the Income Tax Act.

In view of the above, the question referred to us is answered in the affirmative, i. e., in favour of the Revenue and against the assessee. There shall be no order as to costs.