9911796707
TMI Blog1982 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... been taxed on its business income under the Indian I.T. Act, 1918, and that the other conditions laid down in s. 25(4) of the 1922 Act for entitling an assessee to the relief under that provision are satisfied. The constitution of the firm had undergone several changes in the past; the firm was reconstituted for short periods and whenever any partner retired he gave up his claim to the partnership assets which vested in the continuing partners. A deed of partnership was executed by and between Rogers Haywood, Leonard Mark Blomenstok, H. G. Ablitt and S. C. Roy on 18th May, 1953, which, after reciting the various deeds executed in the earlier years, provided, inter alia : (a) that the partnership should be continued for a term of 6 years from 1-4-1953 and shall expire on 31-3-1959; (b) that Rogers Haywood would retire from the firm on 31-3-1957 but the partnership should be continued by the remaining partners until 31.3.1959; (c) what would be the shares of the partners as varied from year to year including the shares of the remaining partners after Haywood's retirement ; (d) that the goodwill of the firm was to belong to Haywood until Ws retirement; thereafter it was to devolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year ended on March 31, 195,9, the respondent-assessee filed a return of income declaring its total income of Rs. 1,80,300; the return was filed on August 10, 1959, but by a letter dated August 21, 1959, the assessee claimed relief under s. 25(4) of the 1922 Act in respect of that income; it was claimed that by the deed dated 30th March, 1959, the firm of M/s. Pigot Chapman & Co. (which had been assessed and had paid taxes under the 1918 Act and had been regularly assessed to income-tax thereafter) had been dissolved as from 1st April, 1959, and was succeeded by another firm of two partners, Ablitt and Roy, and as such relief under s. 25(4) in respect of the assessment year 1959-60 was due to the respondent-assessee. The ITO, however, took the view that there was no dissolution of the firm and what had actually taken place on April 1, 1959, was merely a change in the constitution of the firm; according to him, the entire assets and liabilities of the old partnership were taken over by the new firm as on April 1, 1959, and there was no cessation of the business within the meaning of s. 25(4) of the 1922 Act. He, therefore, dismissed the assessee's claim for relief under, s. 25(4). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution of a partnership, no tax shall be payable by the first mentioned person in respect of the income, profits and gains of the period between the end of the previous year and the date of such succession, and such person may further claim that the incomes profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period. Where any such claim is made, an assessment shall be made on the basis of the income, profits and gains of the said period, and, if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference. " Counsel for the appellant pointed out that s. 25(4) itself makes a distinction between a case of succession by another person upon a dissolution of the firm and a case where there is merely a change in the constitution of a partnership and according to him in order to get relief thereunder it is necessary to show that there has been a succession by another person and not merely a change in the constitution of the partnership. Counsel further pointed out that in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was a case of a dissolution of the erstwhile firm and succession to the old business by a new firm and as such both the Tribunal and the High Court were in error in granting relief under s. 25(4) to the respondent-assessee. We might mention that in support of the aforesaid contention, counsel for the appellant relied upon few decided cases including a decision of this court in CIT v. A. W. Figgies & Company [1953] 24 ITR 405, but in our view it is unnecessary to discuss the facts of those cases and the conclusions reached therein because the principle is well settled that it is on an examination of relevant documents and relevant facts and circumstances that the court has to be satisfied in each case as to whether there has been a succession or a mere change in the constitution of the partnership. It cannot be disputed that " dissolution " and " reconstitution " are two distinct legal concepts, for, a dissolution brings the partnership to an end while a reconstitution means the continuation of the partnership under altered circumstances but, in our view, in law there would be no difficulty in a dissolution of a firm being followed by the constitution of a new firm by some of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be said to have succeeded to the business of the old firm'? We have already summarised, while narrating the undisputed facts, the effect of the earlier documents commencing from the initial deed of partnership dated 18th May, 1953, right up to the deed dated 30th of March, 1959, with which we are principally concerned. On an examination of these documents the following facts emerge clearly: (a) that the initial partnership between Haywood, Blomenstok, Ablitt and Roy under the deed dated 18th May, 1953, was for a fixed term of six years from April 1, 1953, and as such the same would automatically stand dissolved under s. 42(a) of the Partnership Act on March 31, 1959; (b) under the deed dated 30th of March, 1959, the partnership between Mclean, Ablitt and Roy was in terms " dissolved by mutual consent as from 1st April, 1959 "; (c) the document expressly states both in the recital portion and in the operative part (vide cls. 1 and 2) that the firm has been dissolved by mutual consent; (d) the continuing partners were given the sole right to collect all the assets of the dissolved firm and to issue, recover and give full receipts for all debts of that firm; (e) each of the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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