C.I.T MEERUT versus M/S CIVIL ENG. AND COMPANY

High Court of Judicature at Allahabad

Indian Supreme Court Cases / Judgements / Legislation

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C.I.T Meerut v. M/S Civil Eng. And Company - INCOME TAX REFERENCE No. 3 of 1992 [2005] RD-AH 569 (28 February 2005)

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HIGH COURT OF JUDICATURE OF ALLAHABAD

Court No.37

Income Tax Reference No.3 of 1992

Commissioner of Income-tax    Vs.  M/s. Civil Engineer and Company.

Hon'ble R.K. Agrawal, J

Hon'ble Prakash Krishna, J

The Income Tax Appellate Tribunal, Delhi has referred the following  question of law  under section 256 (1) of the Income Tax Act 1961 (hereinafter referred to as the Act) for opinion to this Court:-

"1. Whether on the facts and in the circumstances of the case, the Hon'ble I.T.A.T. is legally correct to direct that there should be two separate assessments for the two periods relating to two different firms?

2. Whether on facts and in the circumstances of the case the Hon'ble I.T.A.T. was correct to hold that there was no change in constitution of the firm within the meaning of  section 187?

3. Whether on facts and in the circumstances of the case, the Hon'ble I.T.A.T. was legally correct to set aside the order of the learned CIT (A) and allowing depreciation for two separate periods?"

Briefly stated the facts giving rise to the present reference are as follows:-

The reference relates to the assessment year 1983-84.

The assessee is a civil contractor and it filed two returns of income, one for period 1.5.1981 to 31st October, 1981 and the other for the period 1st November 1981 to 13th April, 1982. The income for the period 14th April, 1981 to 30th April, 1982 was not included in the return. Two separate assessments upon two returns filed for the two periods, as indicated above were claimed on the ground that on the retirement of one of the partners Shri Anil Kumar on 13th April, 1982 the Firm stood dissolved. A new Firm was constituted by admitting a new partner Km.Neeru w.e.f. 14th of April 1981. A deed of dissolution of the old Firm and constitution of new Firm was filed. The Assessing Officer made single assessment and also included income for the period 14th April 1982 to 30th April 1982 on estimate basis after rejecting the contention of the assessee. It may be noted here that one of the partners expired on 13th April 1982 and the third period was accentuated on account of the death. This part of the order was confirmed in appeal. The Tribunal in further appeal by the order dt.14th of December 1990 passed in I.T.A. 4790/Del/1987 allowed the appeal of the assessee and found that in view of the dissolution deed and the clause of reconstitution of the Firm, the Firm stood dissolved on the retirement of one of the partners on 13th April 1982.

Heard the learned counsel for the department. None appeared on behalf of the assessee. The learned counsel for the department submitted that, in view of section 187 of the Act it was a case of succession of the Firm on account of retirement of one of the partners.

Section 187 of the Act provides that there is a change in the constitution of Firm if one or more of the partners ceased to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the Firm before the change continue as partner or partners after the change. In the present case on account of retirement of Shri Anil Kumar on 13th April 1982, a new partner Km. Neeru was admitted in the partnership. The other partners continue to remain the partners of the Firm as such.

In this view of the matter we are of the opinion that it is a case of change in the constitution of Firm. The Tribunal was not right in holding that on account of retirement of a partner and in view of the dissolution deed the Firm stood dissolved on 13th April 1982.

In view of the above we answer all the three questions referred to us in the negative i.e. in favour of the Revenue and against the assessee.  There shall be no order as to costs.

Dt.28.2.2005

LBY

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