COMMISSIONER OF INCOME TAX Vs. MADHAVADAS LALCHAND

JUDGEMENT

(1.) IN compliance with the order of this Court dt. 6th April, 1983, the Tribunal referred the following question for the opinion of this Court under s. 256(2) of the IT Act, 1961 :

(2.) THE point for consideration is, having regard to the provisions of s. 187(2) of the IT Act, the Tribunal was justified in law in holding that consequent to the death of one of the partners on 17th July, 1972, there was dissolution of the old firm and hence two separate assessments have to be made one for the period up to 17th July, 1972, and the other for the subsequent period for the asst. yr. 1973-74. THEre was a partnership constituted by a deed dt. 31st October, 1959, wherein it is stated that it will be governed by all the provisions of the Indian Partnership Act, 1932. Under s. 42 of the Partnership Act, subject to contract to the contrary, a firm is dissolved by the death of a partner. On 17th July, 1972, a partner died and since there was no contract to the contrary, it was found that the partnership stood dissolved and a new partnership firm was constituted by a fresh deed dt. 21st July, 1972. THE case of the Revenue was that from the conduct of the parties it must be inferred that there was in fact no dissolution. But the Tribunal found that the question of gathering the intention by the conduct of the parties would not arise when there was an express contract in the agreement and the partnership being one at will, the death of the partner automatically brought it to an end. It was also found that the subsequent conduct of the surviving partners will be irrelevant to ascertain the existence of an agreement between a surviving partner and the deceased to continue the business. Hence, the Tribunal found that there was a dissolution of the firm on the death of a partner and consequently separate assessments had to be made for the period up to the date of death and the period after the date of death during the previous year for the asst. yr. 1973-74.