1994 (7) TMI 49

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..... holding that capital gains arising on the sale of property is not chargeable in the hands of the firm ?" The brief facts of the case are that the assessee-firm was constituted with four partners out of whom two retired in the year 1959. During the period relevant to the assessment year 1982-83, certain properties were attached and sold by the Income-tax Department in public auction for recovery of outstanding tax arrears. The factory building and its office were disposed of for a sum of Rs. 5,72,000 on March 5, 1982. The last assessment was completed in respect of the assessment year 1957-58 and thereafter no assessment was made as the business was discontinued. The Income-tax Officer applied the provisions of section 189 and taxed the ca .....

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..... lso died about 5-10 years earlier to the date of auction. No assessment could have been made of such a dissolved firm which has no existence at all at the time for which the assessment is to be made and, therefore, the order passed by the Income-tax Officer was cancelled. An appeal was preferred by the Revenue before the Income-tax Tribunal which also came to the conclusion that the two partners expired prior to 1953 and the remaining two partners expired about 5-10 years thereafter and the partnership being at will, on account of death of all the partners, the firm stands dissolved in terms of section 42(c) of the Partnership Act. At the time of recovery, the property of the firm was sold, but there was no firm in existence. It was also .....

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..... to tax after its dissolution. It is not the power of recovery of tax which is to be examined, but as to whether there could have been any assessment of tax by invoking the provisions of section 189 when the firm had not carried on any business and was not in existence (because it was dissolved). Section 2(31) of the Act defines "person" and a firm has been included in the definition of person. It has not been brought on record as to who are the persons on behalf of the deceased partners who have inherited the property of such deceased partners. If the firm is not in existence then assessment could be made of the persons who are the legal heirs. The fact that the firm was not in existence during the assessment year 1982-83 has not been stre .....

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