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TMI Blog1986 (9) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm as on that date, viz., Miss Kochuthresia Antony, Miss Etty Antony and Shri P.A. Jose. The assessee further contended before the AAC that as per the original partnership deed as well as the new deed, the profits were to be ascertained only on the normal date of closing the accounts and the persons who were partners at that point of time alone had a right to share of profit and that the partners who retired during the course of the accounting year had no right to any share of profit in respect of the relevant financial year. The AAC deleted the amount of Rs. 14,845 included in the assessee's hands observing as under : "When the intention of the partners of a firm is to ascertain the profits for the entire year on the closing of the accounts on the normal date of closing as provided in the deed and when it is also provided in the deed that the right to the share of profits accrues to the partners only when the accounts are finally closed on the normal closing date as provided in the deed, the ITO will not be justified to allocate any share of profits to a partner who retired during the course of the accounting year. The partner has not claimed any share in the profits ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at the end of the full accounting year. The resultant profit was apportioned between the new partners only. The assessee was not given any share of profit in the same. So the AAC has rightly deleted the amount of Rs. 14,845 following the decision of the Supreme Court in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42. 6. In reply, the departmental representative submitted as under : The decision of the Supreme Court in Ashokbhai Chimanbhai's case applies only to a continuing firm and not to a firm which has become extinct by the retirement of a partner. Further, the appeal filed by the assessee before the AAC is not maintainable as per section 247 of the Act. Moreover, the ITO in his assessment order dated 31-1-1981 in the case of the firm, Peetees Agencies allocated Rs. 14,845 to the assessee as per clause (i) of proviso to section 187(1) of the Act. 7. We have considered the rival submissions. Retirement of a partner from a firm does not dissolve the firm or extinct the firm as laid down by the Gujarat High Court in the case of Keshavlal Lallubhai Patel v. Patel Bhailal Narandas AIR 1968 Guj. 157. Section 247 provides that any partner of such firm may appeal against the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; profit loss Mrs. Mary Antony 50 per cent 80 per cent Shri P.A. Jose 10 per cent &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said deed of partnership dated 31st March, 1975 except so far as the same shall necessarily be modified or affected by this agreement." When the assessee retired from the partnership on 31-8-1977 a new partnership was executed on 2-9-1977 between Shri P.A. Jose, Miss Etty Antony and Miss Kochuthresia Antony. Unaware of the law laid down by the Supreme Court in Ashokbhai Chimanbhai's case the ITO held that the assessee was also entitled to Rs. 14,845 out of the income of the firm for the assessment year 1978-79. So the mere fact of apportionment under section 187(1) cannot fasten a liability on the assessee. Now we have to look whether the assessee is entitled to any share of profit when he retired on 31-8-1977 and when the books of account were not closed to profit and loss on that date. Clause 11 of the partnership deed dated 31-3-1975 clearly shows that annual profit and loss account shall be prepared as on 31st day of March each year. It has been laid down by the Supreme Court in Ashokbhai Chimanbhai's case that in the case of a partnership the profits do not accrue to a partner from day to day or even from month to month and that it will accrue only when the accounts are cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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