COMMISSIONER OF INCOME TAX Vs. KHANNA AND SONS

JUDGEMENT

(1.) THIS is a reference under S. 256 (1) of the IT Act, 1961 ('the Act') at the instance of the Revenue. The Tribunal, Delhi Bench "E", has referred the following two questions for the opinion of this Court:-

(2.) THE dispute pertains to the asst. yr. 1977-78, for which the previous year ended on 31st March, 1977. On 18th Dec., 1976, Govind Ram Khanna, a partner of the assessee firm died. With effect from 20th Dec., 1976 the surviving partners drew up a fresh deed of partnership and decided to carry on the business in partnership. The assessee filed two separate returns, one for the period 1st April, 1976 to 18th Dec., 1976 and the other from 20th Dec., 1976 to 31st Dec., 1977 and claimed separate assessments for the respective periods. The ITO, however, framed one assessment and clubbed the income of the aforesaid two periods on the view that it was a case of a change in the constitution of the firm to which S. 187 of the Act was attracted. On appeal, the Asstt. CIT did not agree with the ITO. He held that on the death of Govind Ram Khanna, there was a dissolution of the firm. The firm constituted thereafter was a distinct and a separate firm. It was a case to which S. 188 of the Act applied and two separate assessments for the two broken periods were to be made and he issued directions, according to the ITO, to make two separate assessments. On further appeal to the Tribunal by the Revenue, the view taken by the appellate authority was upheld.

(3.) THE question for consideration is whether on facts found by the Tribunal, it was a case covered by S. 188 or it fell within the purview of S. 187.