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1959 (4) TMI 37

..... m came into existence. The petitioner, Shivram Poddar, was a partner of the said firm. It appears from the returns filed by the firm for the years 1949-50 and 1950-51, that the principal place of business of the firm was at No. 138, Cross Street, Calcutta, with branches at Ratlam, Indore and 357 Kalbadevi Road, Bombay. The firm carried on business as commission agent in cotton, sale and purchase of cotton and cotton piece goods, and speculation in cotton and silver. It is said that the, firm was dissolved in February, 1950, and that the notice of dissolution of the firm was duly given to the Income-tax Officer, Special Survey Circle III, Calcutta, by March 1953. This, however, is denied by the respondents. On August 20, 1952, a return was filed in respect of the income of the firm before the Income-tax Officer, Special Survey Circle III, Calcutta, in respect of the assessment year 1949-50. An order of assessment was made on October 28, 1952. It is said that the income-tax assessed was duly paid. This firm had an income-tax file in the office of the Income-tax Officer, Special Survey Circle III, Calcutta, and another file in the office of the Second Income-tax Officer, Bombay, in wh .....

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..... he letter "P". The respondents thereupon preferred an appeal, which appeal was dismissed with costs on May 26, 1950. In deciding the said application, I followed my own decision in Manindra Lal Goswami v. Income-tax Officer [1956] 30 ITR 550, wherein I had held that under the circumstances prevailing in the case, there could not be any assessment or reassessment of a dissolved firm as such. This decision of mine has been upheld by the appeal court in R.N. Bose v. Manindra Lal Goswami [1958] 33 ITR 435. I shall refer to this decision in greater detail presently. On March 28, 1958, the said Income-tax Officer who is the respondent No. 1 in this case issued another notice under section 34 read with section 22(2) of the said Act. A copy of this notice is annexed to the petition and marked with the letter "Q". This notice is addressed to " Shri Shivram Poddar, partner of the firm of M/s. Balmukund Radheshyam at the time of it dissolution c/o M/s. Anandram Gajadhar, 33, Netaji Subhas Road, Calcutta." The relevant part of this notice runs as follows: "Whereas I have reason to believe that M/s. Balmukund Radheshyam (name of the firm) was dissolved on or a .....

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..... 1958 (11 of 1958). The new section 44 runs as follows: "44. Liability in case of a firm or association discontinued or dissolved. -(1) Where any business, profession or vocation carried on by a firm or other association of persons has been discontinued or where a firm or other association of persons is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm or other association of persons as such as if no such discontinuance or dissolution had taken place. (3) Every person who was at the time of such discontinuance or dissolution a partner of the firm or a member of the association, as the case may be, shall be jointly and severally liable for the amount of tax or penalty payable, and all the provisions of Chapter IV, so far as may be, shall apply to any such assessment or imposition of penalty." The Finance Act of 1958 received the assent of the President on April 28, 1958. The argument of the learned standing counsel appearing on behalf of the petitioner in this case is shortly as follows. He argues that under section 44 of the Act before the amendment it was not possible to assess a firm which had been dissolved under any circumstanc .....

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..... he amendment, did not contemplate the case of a dissolution. He says that advisedly the Legislature has used two different sets of expressions in the two different cases and it is not possible to say that no distinction was intended to be laid down. The learned standing counsel » referred to the appeal court judgment which I have mentioned above R.N.Bose v. Manindra lal Goswami. [1958] 33 ITR 435 The facts of that case were as follows: A, B and C were the partners of an unregistered firm, Dyes and Chemical Agency, which did business from April 1, 1940, up to March 31, 1944, when it was dissolved. The Income-tax Officer being of the opinion that the firm's income for the assessment year 1943-44 had escaped assessment, issued a notice to A under section 34 of the Indian Income-tax Act, 1922, on November 25, 1944. He was described as "A, partner of Dyes and Chemical Agency". The income which had been discovered to have escaped assessment was described as "your income" and he was required to submit a return of "your total income and the total world income" assessable for the year ending March 31, 1944. When the matter came up before me in the ori .....

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..... But he has not decided this question finally for the simple reason that parties before him admitted that section 44 of the Act applied, although it was a case of dissolution, and proceeded upon that footing and it was not necessary to decide the point. In fact, the learned Chief Justice says so in the paragraph set out above. It is true that the learned Chief Justice also says that he was unable to accept the contention that discontinuance included dissolution, but he was obviously thinking about temporary discontinuance, because he accepts the proposition that the dissolution of a firm must involve the discontinuance of business, but the reverse was not true. The reverse would not be true in the case of temporary discontinuance. But where a partnership business has been permanently discontinued it must be taken to have been dissolved, because it can no longer continue in the eye of law. There cannot be a partnership which permanently carries on no business. Under section 2(6B) of the Indian Income-tax Act, "firm", "partner" and "partnership" have the same meanings as in the Indian Partnership Act, 1932. The word "partnership" has been define .....

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..... rries on business for the purpose of winding up. In my opinion this is not a point of substance. The position in the case of winding up of a firm has been explained in Lindley on Partnership, nth edition, page 722, at 723. It has been pointed out that for the purposes of winding up, a partnership is "deemed" to continue, meaning thereby that this is merely a legal fiction and that in fact it does not do so. This is also made clear in sections 46 and 47 of the Indian Partnership Act. After dissolution, unfinished transactions must be finished, the debts of the firm paid and the surplus distributed amongst the partners. These provisions are based on section 39 of the English Act and the position in English law has been stated above. For only these limited purposes, the business is "deemed" to continue, but in fact the partnership comes to an end upon dissolution. In this case, however, this is merely an academic argument because the firm has long ago been dissolved and it is nobody's case that it is being continued even partially for the purposes of winding up. Indeed, as Mr. Meyer pointed out, the respondents would gladly accept the position that the firm had .....

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