- (1.) THE Income -tax Appellate Tribunal, New Delhi, has referred the following questions of law under Section 256(1) of the Income -tax Act, 1961, (hereinafter referred to as 'the Act'), for the opinion of this court: 1. Whether, on the facts and circumstances of the case, the Tribunal was legally justified in holding that the unpaid liability towards payment to employees' provident fund, family pension, employees' State insurance and employees deposit linked insurance was not covered by the provisions of Section 43B of the Act?
(2.) WHETHER , on the facts and circumstances of the case, the Tribunal was legally justified in confirming the Commissioner of Income -tax (Appeals)'s finding that the proviso to Section 187(2) of the Act was applicable and there was a dissolution of the firm on the death of one of its partners on June 23, 1985, in spite of the fact that clause 10 of the partnership deed dated April 27, 1985, specifically provided that in the event of the death of any partner the firm would not be dissolved? Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in coming to the conclusion that the partners of the firm decided to dissolve the firm on June 23, 1985? 2. The reference relates to the assessment years 1986 -87 and 1987 -88. 3. Briefly stated the facts giving rise to the present reference are as follows:
(3.) THE Income -tax Officer by applying the provisions of Section 43B of the Act added to the returned income the unpaid liabilities on account of employees' provident fund, family pension fund, employees' State insurance and employees' deposit linked insurance amounting to Rs. 558 in the assessment year 1986 -87 and Rs. 2,851 in the assessment year 1987 -88. The aforesaid action on the part of the Income -tax Officer was upheld by the Commissioner of Income -tax (Appeals). On further appeal by the assessee, the Tribunal opined that the provisions of Section 43B were not applicable in respect of the aforesaid items. The assessee -firm had filed two returns, one for the period from April 1, 1985, to June 23, 1985, and the other for the period from June 24, 1985, to December 31, 1985, for the reason that one of its partners had died on June 23, 1985, whereupon the assessee -firm had stood dissolved. The Assessing Officer treated the case as that of succession particularly for the reason that condition No. 10 in the partnership deed required continuation of the business of the assessee without dissolving the partnership even in the case of death of a partner. The Commissioner of Income -tax (Appeals), however, took the view that it was a case of dissolution of the old partnership on the death of the partner on June 23,1985, as per the proviso to Section 187(2) of the Act and, therefore, he directed the Assessing Officer to frame two assessments for each of the accounting periods, referred to above. Being aggrieved with the order passed by the Commissioner of Income -tax (Appeals), the Revenue came up in appeal before the Tribunal and before whom it was submitted that in view of the specific condition of the old partnership deed, the partnership could not be deemed to have been dissolved on the death of the partner on June 23, 1985, and the business of the assessee -firm should be deemed to have been continued by surviving partners and, therefore, there should be only one assessment in the case. The Tribunal, however, rejected the aforesaid argument by taking specific note of the proviso to Section 187(2) of the Act which laid down that the death of a partner resulted in the dissolution of the firm. Note was also taken of the fact that the aforesaid provision was inserted with retrospective effect from April 1, 1976. In the ultimate analysis, the Tribunal came to the conclusion that the firm stood dissolved on the death of one of its partners notwithstanding that there was a clause to the contrary in the partnership deed.;