TMI Blog2009 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining partners of the firm and a new partnership deed was executed on July 2, 1977, which was made effective from July 1, 1977, itself – Held that case is covered under section 187(1) of the Act and the Tribunal was not justified in deleting the addition of Rs. 2,00,155 on the ground that there was no question of any addition to be made in the hands of new firm and has ignored the provisions of section 187(1) of the Act – Only one assessment be made. - 194 of 2005 - - - Dated:- 20-4-2009 - R. K. AGRAWAL and RITU RAJ AWASTHI JJ. A. N. Mahajan for the appellant. Suyash Agrawal for the respondent. JUDGMENT The present income-tax appeal filed under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows : 3. The present appeal relates to the assessment year 1978-79. 4. The previous year ended on March 31, 1978. The respondent-assessee is a firm and was constituted with 13 partners, which was engaged in the manufacturing of M S Rounds. With effect from July 1, 1977, two partners, viz., Shri Subhash Chand and Smt. Kailashwati, retired and by mutual consent, the partnership was treated as dissolved. 5. On July 1, 1977, two other persons, viz., Shri Amrit Lai and Shri Narender Kumar joined as partners along with the eleven remaining partners of the firm and a new partnership deed was executed on July 2, 1977, which was made effective from July 1, 1977, itself. 6. For the assessment under consideration, the firm filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent. 8. Sri Mahajan, learned counsel submitted that as in the present case, two out of 13 partners retired and the firm continued with two new partners taken in the firm immediately on the next date and the business and liability having been taken over. On the other hand, notwithstanding the fact that the deed of dissolution was executed, in view of the provisions of clause (a) of sub-section (2) of section 187 of the Act, it will be a case of reconstitution and not a case of succession and, therefore, only one assessment ought to have been made for the two periods and not two, as directed by the Tribunal. In support of the aforesaid plea, he has relied upon the decisions of this court and of the hon'ble Supreme Court, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and, therefore, for the purposes of income-tax the provisions of the Income-tax Act, 1961, would have an overriding effect over the provisions of the Indian Partnership Act, 1932, or any other general law. 13. In the present case, the Income-tax Act, 1961, specifically provides for a change in the constitution of the firm. Sub-clause (a) of sub-section (2) of section 187 of the Act provides the circumstances and situation under which a change in the constitution of the firm has to be treated. It specifically provides as follows: "(2) For the purposes of this section, there is a change in the constitution of the firm- (a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has held as follows (page 359): "Section 187 says that where, at the time of making an assessment, it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as it is constituted at the time of making the assessment. 'Change in the constitution of the firm' is defined for the purpose. The relevant part of the definition states that if one or more of the partners cease to be partners 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, there is a change in the constitution of the firm. These provisions would apply to a firm which survives upon the death of a partner. They would apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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