COMMISSIONER OF INCOME TAX Vs. M V KRISHNAIAH

JUDGEMENT

(1.) This is a reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue by the Income-tax Appellate Tribunal, Hyderabad, in which the following question is referred for the opinion of this court :

(2.) The facts necessary for appreciating the contentions of the parties are as follows : By a deed of partnership dated 16/12/1970, four partners were carrying on business. The accounts of the firm are to be closed by the end of December each year, that is, the accounting year is the calendar year. The partnership was registered under the provisions of the Indian Partnership Act and registration was also granted by the Income-tax Officer under section 185 of the Income-tax Act. The firm continued to carry on business and, while so, on 3/08/1973, one of the partners by name Aswathanarayanaiah died. He left a will by which he directed that his three daughters were to step into his shoes as partners in terms of clauses 7 and 8 of the partnership deed. The said clauses of the partnership deed are as follows :

(3.) On 4/08/1973, in the day book of the firm, the following entries were made :