TMI Blog1998 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax amount of Rs. 1,80,203 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition to the closing stock ?" We first take up question No. 1. The relevant facts are that the assessee-firm stood dissolved on January 12, 1987, meaning thereby it continued only for 12 days in the previous year, relevant to the assessment year 1988-89. Upon dissolution, all assets and liabilities of the dissolved firm were taken over by a private limited company---one of the partners of the assessee-firm. The sales tax liability of the firm relating to the calendar year 1986 relevant to the assessment year 1987-88 and to 12 days of the calendar year 1987, relevant to the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of the year in which the same was dissolved. If a firm is deemed to have continued for the purpose of the assessment for a particular assessment year notwithstanding its dissolution during that assessment year, we see no good reason why the firm, which is deemed to have continued under section 189(1), is not entitled to deduction of the liability, discharged during that year. In this case, sales tax liability relating to the calendar year 1986, relevant to the assessment year 1987-88 and 12 days of the calendar year 1987, relevant to the assessment year 1988-89 was discharged during the previous year, relevant to the assessment year 1988-89. Since the firm is deemed to have continued for the purpose of assessment under section 189( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of dissolution is totally different. The Madras High Court held at page 759 as follows: "But the situation is totally different when the firm is dissolved or when a partner retires. The settlement of his account must be not on a notional basis but on a real basis, that is every asset of the partnership should be converted into money and the account of each partner settled on that basis ... The assets have to be valued, of course, on the basis of the market value on the date of the dissolution. . ." The Supreme Court, relying on a short passage from Pickles on Accountancy (third edition), page 650, further opined that there can be no manner of doubt that, in taking accounts for purposes of dissolution, the firm and the partners, bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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