9911796707
TMI Blog1998 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... hree firms constituted under the deeds of January 31, 1978, October 1, 1979 and November 1, 1979, for the assessment year 1980-81 is in accordance with law ?" The assessee is a registered firm. During the accounting period relevant for the assessment year 1980-81 there were changes in the constitution of the firm. The assessee-firm filed three returns of income for the period from April 1, 1979, to September 30, 1979, consisting of five partners, from October 1, 1979, to October 31, 1979, consisting of four partners and from November 1, 1979, to March 31, 1980, consisting of three partners. It is found that the reduction in the number of partners arose on account of the retirement of the partners. The original partnership was evidenced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellate Tribunal and the Appellate Tribunal has stated a case and referred the question of law set out earlier. The Tribunal has given three reasons to hold that there was only change in the constitution of the firm. The first reason is that there was no extinction of the firm, secondly, it came to the conclusion that the affairs were not finally and completely wound on October 1, 1979, and November 1, 1979 and thirdly, no dissolution accounts were drawn up and the accounts of the partners were not settled among the partners. From the above three premises, the Tribunal came to the conclusion there was only change in the constitution of the firm and there was no dissolution of the firm. We are of the opinion that the three reasons g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o went out of the firm would be governed by the deed of dissolution as well as by the provisions of the Indian Partnership Act. The third circumstance that is relied upon by the Tribunal is that the accounts of the partners were not settled is a ground to hold that there was no dissolution of the firm as it is always open to the partners who went out of the firm to demand their dues or file a suit for accounts and claim amount due from the partnership firm under the partnership law. The three circumstances relied upon by the Appellate Tribunal do not establish that the firm continued with the same changes taking place in the constitution of the firm. Once the dissolution deed was executed and on that basis the new firm carried on the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge in the constitution of the firm. The principle laid down in the above decisions would apply to the facts of the case as the relationship between the parties came to an end by the execution of the deed of dissolution and the old firm ceased to exist dissolved in the eye of law and it can no longer be said that the firm continued and there was only a change in the constitution of the firm. In the view we have taken, it is not necessary to consider other decisions relied upon by learned counsel for the Revenue, viz., Kaithari Lungi Stores v. CIT [1976] 104 ITR 160 (Mad) and Mavukkarai (N.) Estate Tea Factory v. Addl. CIT [1978] 112 ITR 715(Mad). We are of the opinion that the Tribunal has not applied proper tests to determine whether there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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