COMMISSIONER OF INCOME-TAX Vs. ECLAT AUTO AGENCY

JUDGEMENT

(1.) THE following questions of law have been referred to this court for its opinion, at the instance of the Commissioner of Income-tax, Amritsar, by the Income-tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as "the Tribunal"): " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that it was a case of dissolution of the firm and not of expulsion of a partner ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee-firm was entitled to registration under Section 185 of the Income-tax Act, 1961 ?"

(2.) THE brief facts giving rise to the reference are that the firm known as M/s. Eclat Auto Agency, Amritsar, came into existence on 18th October, 1963, and it consisted of four partners, namely, Sarvshri Charanjit Lal Aggarwal, Paras Prabhu Aggarwal, Ravinder Kumar Aggarwal and Kamal Narain Aggarwal. Shri Surinder Kumar Aggarwal, a minor, had been admitted to the benefits of the partnership.

(3.) ON 31st August, 1966, Shri Charanjit Lal Aggarwal retired from the said partnership and the remaining partners including Shri Surinder Kumar Aggarwal, who attained majority on 19th August, 1966, continued to carry on the business under the partnership deed dated 15th August, 1966. Later on Charanjit Lal again joined the firm and a new partnership deed dated 23rd August, 1968, was executed between the partners. Before joining the firm, Shri Charanjit Lal Aggarwal had promised to contribute a sum of Rs. 30,000 or Rs. 40,000 as his capital. On his failure to honour his word, Shri Paras Prabhu Aggarwal gave a notice dated 8th January, 1969 to Shri Charanjit Lal Aggarwal to the effect that since he had not paid his share of the capital, he could no longer remain as a partner in the firm and the partnership would stand dissolved with effect from 31st March, 1969. A copy of this notice was sent by Shri Paras Prabhu Aggarwal to the other partners as well. Simultaneously, Shri Paras Prabhu Aggarwal wrote a letter dated 14th January, 1969, to the ITO intimating that the firm will stand dissolved with effect from 31st March, 1969.