S.N.BHARGAVA, J. -
(1.)THIS is a reference under s. 256(1) of the IT Act, 1961 (hereinafter to be referred to as "the Act"), wherein the Tribunal, Jaipur Bench, has referred the following question of law for the opinion of this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that s. 187(2) of the IT Act, 1961, was not applicable in this case, and further that separate assessments be made on the two firms for the asst. yr. 1969-70 ?"
The facts giving rise to this reference, briefly stated, are as follows :
(2.)THE assessee, M/s M. K. M. Moosa Bhoy Amin, is a registered firm constituted under a deed of partnership dated December 7, 1956, with the following five partners :
1. Shri Shamsuddin 2. Shri Saifuddin 3. Shri Saifuddin (Sunelwala) 4. Shri Hakimuddin 5. Shri Fatima Bai
One of the partners, namely, Shamsuddin, died on June 11, 1968, and, thereafter another partnership deed was executed on June 13, 1968, among the remaining four partners of the earlier firm and Shri Kutbuddin and Shri Kalimuddin, sons of Shri Shamsuddin, deceased partner, and it commenced its business on or from June 12, 1968. The assessee filed two returns one for the period from November 3, 1967, to June 11, 1968, and the other for the period from June 12, 1968, to October 21, 1968. The ITO was of the opinion that there was only a change in the constitution of the firm and, therefore, two separate assessments could not be made and, hence, he clubbed the income for both the periods in that assessment year. The assessee preferred an appeal to the AAC. The AAC agreed with the contention of the assessee that after the death of a partner the, firm was automatically dissolved since there was no clause in the partnership deed for continuity of the firm and a new partnership came into being on and from June 12, 1968. Therefore, he was of the view that two separate assessments should have been made for the two different entities for the two periods and directed the ITO accordingly.
The Department appealed to the Tribunal and contended that the case was covered by s. 187(2) of the Act and, therefore, there should have been only one assessment and, in this connection, relied on the following cases :
(1) Shivram Poddar vs. ITO (1964) 51 ITR 823 (SC). (2) R. B. Jessa Ram Fateh Chand vs. CIT (1971) 81 ITR 409 (All). (3) CIT vs. K. H. Chambers (1965) 55 ITR 674 (SC). On behalf of the assessee, reliance had been placed on : (1) Bhausa Ganusa Pawar & Co. vs. CIT (1966) 62 ITR 75 (Bom). (2) Sita Ram Har Govind vs. CIT (1971) 79 ITR. 575 (All).
However, the Tribunal found that on the death of Shri Shamsuddin, one of the partners, the assessee-firm stood automatically dissolved by operation of law and altogether a new firm came into being on and from June 12, 1968, and, therefore, s. 187(2) of the Act will not apply and dismissed the appeal.
The Department moved an application under s. 256(1) of the Act for making a reference to this Court and the Tribunal referred the above-mentioned question of law for opinion to this Court.
(3.)WE have heard Shri R. N. Surolia, the learned counsel for the Department, and Shri N. K. Jain, the learned counsel for the assessee, and have gone through the record of the case and also the various authorities submitted at the Bar.
The learned counsel for the Revenue has placed reliance on a Full Bench decision, consisting of five Judges, of the Punjab High Court in Nandlal Sohanlal vs. CIT 1978 CTR (P & H) 5 (FB) : (1977) 110 ITR 170 (P & H) (FB), wherein it has been held by majority relying on the Supreme Court's judgments in
(1) C. A. Abraham vs. ITO (1961) 41 ITR 425 (SC), and (2) CIT vs. S. V. Angidi Chettiar (1962) 44 ITR 739 (SC), that where a special provision was made in a taxing statute in derogation of the provisions of the Partnership Act, effect should be given to it and where no such provision had been made, liability for payment of tax could be determined by taking into consideration the general provisions of the Partnership Act.
Therefore, where the provisions of the IT Act are clear, resort cannot be had to the provisions of another statute like the Partnership Act. Therefore, s. 187 of the IT Act overrides the provisions of s. 42 of the Partnership Act and, therefore, the Tribunal was wrong in holding that there should be two assessments. The Punjab High Court followed its earlier view in Hoshiarpur Electric Supply Co. vs. CIT (1971) 79 ITR 164 (P&H), and also relied on Karupukula Suryanarayana Shetty and Sons vs. CIT (1973) 92 ITR 141 (Mys) and Addl. CIT vs. Visakha Flour Mills (1977) 108 ITR 466 (AP) (FB) and dissented from the Allahabad High Court decisions in CIT vs. Shiv Shankar Lal Ram Nath 1975 CTR (All) 22 : (1977) 106 ITR 342 (All) and Dahi Laxmi Dal Factory vs. ITO (1976) 103 ITR 517 (All) (FB). Whereas, the learned counsel for the assessee has relied on the following authorities : (1) CIT vs. Sant Lal Arvind Kumar (1981) 28 CTR (Del) 207 : (1982) 136 ITR 379 (Del), which has taken a contrary view and has relied on earlier decisions reported in Dahi Laxmi Dal Factory vs. ITO (supra), CIT vs. Kunj Behari Shyam Lal (1977) 109 ITR 154 (All) (FB), Addl. CIT vs. Dilsukh Rai Madho Prasad 1975 CTR (All) 229 : (1977) 108 ITR 299 (All), Kaithari Lungi Stores vs. CIT 1976 CTR (Mad) 311 : (1976) 104 ITR 160 (Mad), Mavukkarai (N.) Estate Tea Factory vs. Addl. CIT (1978) 112 ITR 715 (Mad), Addl. CIT vs. Thyagasundara Mudaliar (1981) 127 ITR 520 (Mad), Addl. CIT vs. Vinayaka Cinema 1977 CTR (AP) 212 : (1977) 110 ITR 468 (AP) (FB) and Mathurdas Govardhandas vs. CIT 1977 CTR (AP) 97 : (1980) 125 ITR 470 (Cal) and has dissented from the earlier view of the Punjab High Court reported in Dharam Pal Sat Dev vs. CIT (1974) 97 ITR 302 (P&H), Jupiter Foundry & Machines (Knives) vs. CIT (1977) 109 ITR 92 (P&H), Addl. CIT vs. Visakha Flour Mills Ltd. (1977) 108 ITR 466 (AP) (FB) and Nandlal Sohanlal vs. CIT (supra).
Similarly, the Allahabad High Court in CIT vs. Satya Deo Omprakash (1982) 30 CTR (All) 284 : (1982) 136 ITR 720 (All), has followed its earlier decisions and has held that where a firm is dissolved either by agreement of partners or by operation of law on the death of a partner and another firm takes over the business s. 187(2) will not come into operation and two separate assessments will have to be made.