GANESH RICE MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference is made under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, referring for our answer the following question of law :

(2.) THE reference relates to the assessment year 1965-66. THE relevant previous year is from Diwali 1963 to Diwali 1964. M/s. Ganesh Rice Mills was constituted as a partnership firm by an instrument of partnership executed on 25th October, 1956. THE firm consisted of the adult partners, namely, Chandra Shekhar Trivedi and Shyam Manohar. THE adult partners had each 6 annas share in the profits of the firm. THE minor, Narayan Prasad, was admitted to the benefits of the partnership. He was given 4 annas share in the profits. THE partnership was granted registration up to the assessment year 1964-65. An application was filed for allowing the continuation of the registration of the partnership under Section 184(7) on 1st July, 1965, for the assessment year 1965-66. This application was signed by Shyam Manohar and Narayan Prasad, who had become major, on 1st March, 1963. Chandra Shekhar, the other adult partner, retired on 11th March, 1964, and thereafter died on March, 1965. Another instrument of partnership was executed on 5th April, 1964, with effect from 12th March, 1964, by Shyam Manohar and Narayan Prasad. THE application filed on 1st July, 1965, sought continuation of registration of the firm as constituted by the earlier instrument of partnership up to 11th March, 1964, on the plea that the firm was dissolved on that date and a new firm was constituted from 12th March, 1964, by the second instrument of partnership executed on 5th April, 1964. THE ITO refused continuation of registration of the firm and his order was confirmed in appeal by the AAC. THE Tribunal also confirmed the order refusing continuation of registration of the firm on the reasoning that the minor, having become a major, there was a change in the constitution of the firm and that no registration could be granted for a part of the previous year.

(3.) SECTION 187 provides that where, at the time of making an assessment under SECTION 143, or SECTION 144, it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment. Where a firm carrying on a business or profession is succeeded by another firm, and the case is not one covered by SECTION 187, SECTION 188 requires that separate assessments shall be made on the predecessor-firm and the successor-firm in accordance with the provisions of SECTION 170.