J.S. Verma, C.J. - (1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue, to answer the following question of law, namely : "Whether, on the facts and in the circumstances of the' case, the Tribunal was right in reversing the order of the Commissioner of Income-tax that there was no dissolution of the firm on the death of the partner in view of the agreement to the contrary under Clause 6 of the partnership deed and the Income-tax Officer, therefore, was not right in granting continuation of registration to the firm for the period ending March 13, 1978?"
(2.) THE relevant assessment year is 1978-79 for which the previous year ended on March 31, 1978, THE assessee-firm comprised of six partners of whom one, namely, Mohd. Hussain, died on March 13, 1978. THE assessee claimed that the firm stood dissolved on the death of the partner, Mohd. Hussain, on March 13, 1978. For the period ending on March 13, 1978, pertaining to the year 1978-79, the assessee claimed renewal of registration which was allowed by the Income-tax Officer under Section 184(7) of the Act. Another return was filed for the period, March 14, 1978 to March 31, 1979, and for that period registration was claimed which too was allowed by the Income-tax Officer. THEre was a clause in the partnership deed according to which the firm was not to stand dissolved in the event of death of a partner and it was to be continued by taking in the legal heir of the deceased. The Commissioner of Income-tax formed the opinion that on account of the contract to the contrary in the deed of partnership, there was no dissolution of the firm on the death of Mohd. Hussain and there being merely a change in the constitution of the firm on his death, the Income-tax Officer was not right in granting continuation of registration even up to March 13, 1978, the date of death of Mohd, Hussain. The Commissioner was of the opinion that the Income-tax Officer's order was prejudicial to the interests of the Revenue and, therefore, being seized of the matter relating to the assessment year 1978-79, he held that the Income-tax Officer was not right in granting continuation of registration on the strength of Form No. 12 even up to March 13, 1978. The assessee preferred an appeal to the Tribunal which has set aside the order of the Commissioner on this point. In view of the fact that the question for decision by us involves the correctness of the Income-tax Officer's action granting continuation of registration to the firm for the period ending on March 13, 1978, when Mohd. Hussain died and not for any subsequent period, the material facts and the Tribunal's view to this extent alone need to be stated. The Tribunal held that the consequence of Mohd. Hussain's death on March 13, 1978, and the nature of the firm which carried on the business thereafter is not significant for deciding the assessee's claim for registration for the assessment year 1978-79 only up to March 13, 1978, when one of the partners, Mohd. Hussain, died. The Tribunal held that the assessee's claim for registration for the assessment year 1978-79 on the basis of the accounting period having ended on March 13, 1978, when Mohd. Hussain died, was quite justified, irrespective of the consequence of Mohd. Hussain's death on the nature of the firm which carried on the business thereafter. The only point for our decision is whether this view taken by the Tribunal for the period ending on March 13, 1978, is justified. Learned counsel for the assessee categorically stated before us that it is only the assessee's claim for continuation of registration of the firm till March 13, 1978, when Mohd. Hussain died, which is being pressed before us. Moreover, this is also the question referred to us for decision. Learned counsel for the assessee placed reliance on the recent Supreme Court decision in Wazid Ali Abid Ali v. CIT [1988] 169 ITR 761, to contend that in these circumstances, registration could be continued to the firm under Sub-section (7) of Section 184 of the Act up to March 13, 1978, the date on which one of the partners, Mohd. Hussain, died. In Wazid Alt's case [1988] 169 ITR 761 (SC), the assessee filed a declaration in Form No. 12 for the relevant assessment year 1965-66 under Section 184(7) of the Act. The relevant previous year for the assessment year 1965-66 ended on November 4, 1964. On June 4, 1964, during that period, one of the partners died and his son joined the firm as a partner. On behalf of the assessee, it was contended in the alternative, that the assessee was entitled to the continued benefit of registration at least for that part of the previous year during which the deceased partner had remained alive. The Tribunal held that there was a change in the constituion of the firm as a result of death of one partner and induction of his son into the firm but the alternative contention of the assessee was accepted taking the view that the condition laid down in Sub-section (7) of Section 184 of the Act had been satisfied and that the assessee would be entitled to the benefit of registration up to June 4, 1964, that is to say, for a part of the previous year. In other words, the assessee's claim for continuing the registration under Section 184(7) of the Act up to the date of death of the partner, i.e., for a portion of the year, was accepted. The Allahabad High Court differed from the view of the Tribunal. Thereafter, the Supreme Court upheld the Tribunal's view which has already been stated.
(3.) IN view of the decision of the Supreme Court in Wazid Ali's case [ 1988] 169 ITR 761, it must be taken as settled that even where there is no dissolution of the firm on the death of a partner on account of a contract to the contrary in the deed of partnership, benefit of registration up to the date of death of the partner can be given under Section 184(7) of the Act for a portion of the year, since the firm continued in the same capacity till the death of its partner. This being the only relief claimed by the assessee and granted to it by the Tribunal, the Tribunal's view has to be sustained. Learned counsel for the Revenue placed reliance on a Division Bench decision of this court in Udaipur Soap Factory v. CIT [1987] 167 ITR 613, to contend that registration could not be granted for a part of the year as claimed by the assessee in the present case. It is sufficient for us to say that anything in this Division Bench decision which is contrary to the Supreme Court decision in Wazid Ali's case [1988] 169 ITR 761, cannot, to that extent, be considered good law. Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal was justified in affirming the Income-tax Officer's view that the assessee was entitled to the benefit of registration up to March 13, 1978, the date on which one partner, Mohd. Hussain, died, under Section 184(7) of the Act. No costs. ;