COMMISSIONER OF INCOME TAX Vs. AYYANARAPPAN AND CO

JUDGEMENT

(1.) AT the instance of the Revenue, the Tribunal referred the following question for the opinion of this Court, under s. 256(1) of the IT Act, 1961, hereinafter referred to as the 'Act' :

(2.) THE assessee is a firm. One of the partners died on 28th May, 1976 and immediately thereafter the firm was reconstituted. In the previous year ended 31st March, 1976 the assessee had transferred five assets in favour of four partners and a stranger. In computing the profits under s. 41(2) of the Act, the ITO took into account the depreciation deducted in the assessment made on the firm prior to the reconstitution also, in the view that the death of the partner led only to a change in the constitution and there was no succession of one firm by another. On appeal, the AAC held that, in computing the profits under s. 41(2) of the Act, only the deductions granted to the assessee firm could be taken into account and not deductions granted to the dissolved firm. On further appeal also, the Tribunal confirmed the order of the AAC.