DHANAMALL SILK MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under Section 256(1) of the Income -tax Act, 1961, at the instance of the assessee, the Income -tax Appellate Tribunal has referred the following question of law to this court for opinion :

(2.) THE controversy pertains to the assessment year 1973 -74. The material facts of the case are as follows : The assessee, Dhanamall Silk Mills, was a partnership firm formed by five partners, P.D. Aswani, C.T. Sherwani, C.D. Aswani, D.N. Aswani and B.C. Sherwani. It had carried on the business of manufacture of rayon textiles with the aid of machinery, land and buildings which belonged to one of its partners, P.D. Aswani. On August 31, 1971, all the partners assigned the entire running business of the firm with all its assets and liabilities at book value to a limited company, namely, Dhanalakshmi Silk Mills Private Limited, andput the latter in possession. Thereafter, the business till then carried on by the firm was carried on by the company. The partnership firm stood dissolved with effect from August 31, 1971. In the previous year relevant to the assessment year 1973 -74, the Income -tax Officer refunded a sum of Rs. 60,921 as interest under Section 214 of the Income -tax Act, 1961 ('the Act'), on the excess payment made by the firm. The said amount was received by the erstwhile partners of the said firm. The return was filed by one of the erstwhile partners of the said firm in the name of the erstwhile firm in the status of a registered firm. A declaration under Section 184(7) of the Act in Form No. 12 for continuance of the registration was also filed along with the return showing taxable income of Rs. 60,921 of the assessee.

(3.) WE have heard learned counsel for the assessee. The question referred to us in this case is whether the Tribunal was right in refusing the continuance of the registration to the assessee under Section 184(7) of the Act. So far as the facts of this case are concerned, there is no dispute that the business for which the partnership was constituted came to an end on August 31, 1971, when the entire business was transferred to a limited company. There is also no dispute about the fact that thereafter neither any business was carried on by the partners nor it was intended to be carried on. The firm stood dissolved on transfer of the business to the limited company on August 31, 1971. Section 184 of the Act deals with registration of firms and continuance of registration. In the instant case, the firm was registered as a partnership firm for the period up to August 31, 1971. Under Sub -section (7) of Section 184 of the Act, the registration granted to the firm for any assessment year may have effect for subsequent assessment years provided there is no change in the constitution of the firm as evidenced by the instrument of partnership on the basis of which the registration is granted. In the instant case, the firm was constituted for carrying on a particular business. The business came to an end on August 31, 1971, and the firm got dissolved. The registration granted under Section 184 no more existed. That being so, neither the dissolved firm could have applied for continuance of registration under Section 184(7) of the Act nor the Income -tax Officer could have passed any order under that section for continuance of the registration of the firm. The continuance of registration under Sub -section (7) of Section 184 of the Act contemplates existence of the firm during the period for which the continuance is sought for. In the instant case, the admitted position is that the firm was no more in existence after August 31, 1971. In that view of the matter, the Tribunal was right in holding that the assessee was not entitled to continuance of registration under Section 184(7) of the Act as the firm for which the registration was sought for was no more in existence during the material period. We do not find any infirmity in that conclusion of the Tribunal.