COMMISSIONER OF INCOME TAX Vs. SURAJBHAN OM PRAKASH

JUDGEMENT

(1.) AT the instance of Commissioner of Income-tax, Jodhpur, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (the " Tribunal " herein), has referred the following questions for the opinion of this court which are said to arise out of its order dated June 17, 1978, passed in ITA No. 21/JP/77-78 :

(2.) THE assessee is a partnership firm known as Surajbhan Om Prakash, Raisinghnagar. THE assessment year involved is 1975-76. THE assessee for the previous year relevant to the assessment year 1975-76 filed two returns of income declaring an income of Rs. 40,320 and Rs. 20,403. Prior to the formation of the assessee-firm, there was an old firm, Surajbhan Om Prakash. Its two partners were : (1) Surajbhan and (2) Om Prakash. THE partnership deed executed by them is dated August 31, 1957. THE relevant two clauses of the aforesaid partnership deed are 6 and 11 which are as follows :

(3.) A careful examination of Section 7 and Clause (c) of Section 42 of the Partnership Act clearly shows that a partnership at will is dissolved by the death of a partner but this is, however, subject to the contract between the partners. There is no doubt that Clause 11 of the partnership deed provides for continuance of the partnership after the death of one of the partners, if the surviving partner and the legal heirs or representatives of the deceased partner agree on the terms and conditions to be settled by them to continue the old partnership and, in such circumstances, despite the death of one of the partners, the old partnership firm does not stand dissolved. It is this Clause 11 of the partnership deed dated August 31, 1957, which was executed by Om Prakash, surviving partner, and Suraj-bhan, the deceased partner, which has considerably influenced the Income-tax Officer as well as the Appellate Assistant Commissioner in coming to the conclusion that there should be one assessment on the assessee-firm in respect of both the periods, namely, up to the date of death of Surajbhan, and the other after the date of death of Surajbhan up to the end of the accounting year relevant to the assessment year under consideration. The Tribunal has mentioned Dahi Laxmi Dal Factory v. 1TO [1976] 103 ITR 517 (All) [FB], Kaithari Lurtgi Stores v. CIT [1976] 104 ITR 160 (Mad) and CIT v. Seth Govindram Sugar Mills [1965] 57 ITR 510 (SC) which were relied on by the assessee-firm. It also noticed Nandlal Sohanlal v. C7T[1977] 110 ITR 170 (P&H) [FB] and after considering these authorities, it came to the conclusion that after the death of Surajbhan on July 1, 1974, the old firm stood dissolved. It is the correctness of this finding with which we are concerned in this reference. We shall refrain from referring to the catena . of cases of the various High Courts of the country and in particular of this court as they have little bearing on the question with which we are concerned in this reference. The principles laid down are, of course, well established.