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TMI Blog1988 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act ? " The relevant assessment year is 1974-75 for which the previous year ended on March 31, 1974. The assessee-firm, Sri Krishna Re-rolling Mills, Jaipur, comprised six partners and was constituted by a partnership deed dated November 25, 1965 (annexure "A"). One of the terms in the partnership deed was that the firm shall not be dissolved by the death or retirement or insolvency of any of the partners ; and on the death of any partner, the surviving partners will include the heir or legal representative of the deceased partner as a partner in that firm. Two of the partners of this firm, namely, Smt. Jai Devi and Munshi Lal Gupta, died on July 19, 1973, and July 27, 1973, respectively. The surviving partners, namely, Shriram Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reconstitution or a mere change in the constitution of the firm governed by section 187(2) of the Act. The assessee's appeal to the Appellate Assistant Commissioner was rejected but the further appeal to the Tribunal was allowed. Following the decision of the Allahabad High Court in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All) [FB], the Tribunal has directed the Income-tax Officer to frame two assessments for the aforesaid two-periods as claimed by the assessee, treating it to be a case of succession governed by section 188 of the Act. Hence, this reference at the instance of the Revenue. Learned counsel for the Revenue has placed reliance on the decision of this court in CIT v. Gharsana Beriwal Road Works [1988] 170 ITR 500, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (c) of section 42 of the Indian Partnership Act, 1932, which lays down the general principle of dissolution of a firm on the death of a partner is clearly subject to a contract to the contrary in the terms of the partnership deed. It is, therefore, obvious that as a result of a contract to the contrary in the partnership deed dated November 25, 1965, which provided for continuance of the partnership firm and not its dissolution by death of any partner, the general principle contained in section 42(c) of the Partnership Act, providing for dissolution of the firm on the death of a partner was not attracted. Not only this, the new partnership deed dated November 2, 1973 (annexure "B"), expressly stated that the surviving partners had mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has undoubtedly been misread. It is incorrect to say that this finding is based on any other evidence as claimed by learned counsel for the assessee. Such a finding based entirely on an obvious misreading of the partnership deed cannot be treated as a finding of fact in favour of the assessee as contended by learned counsel for the assessee. The question, therefore, is whether, in this situation, the decision of this court in CIT v. Gharsana Beriwal Road Works [1988] 170 ITR 500 relied upon by learned counsel for the Revenue is distinguishable for any reason. As already indicated, there was a contract to the contrary in the partnership deed as a result of which the partnership firm did not stand dissolved in accordance with the gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be asked is whether there was any contract to the contrary in a given case. Dealing with the facts on which that decision was rendered, it was clearly held that on the death of a partner, there is no dissolution of the partnership firm if there be an express term to the contrary and the partnership is carried on with the remaining partners together with the heir and representative of the deceased partner. It was expressly held that (at p. 765) "by virtue of section 42(c) of the Indian Partnership Act, 1932, a firm was dissolved by the death of a partner but as the section provided, that was subject to the contract between the partners." Reference was also made in this decision of the Supreme Court to the proviso to section 187(2) inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving rise to the Supreme Court decision. The Gujarat decision ([1977] 108 ITR 264) was affirmed by the Supreme Court and it was pointed out that in the facts of that case, the partnership firm was dissolved and transactions were carried on thereafter by the remaining parties in the course of winding up and for realisation of its dues. It is unnecessary for us to deal with any other decision in view of the authoritative pronouncement of the Supreme Court on this point. In our opinion, the Supreme Court decision on this point reaffirms the view taken in the earlier decision of this court in CIT v. Gharsana Beriwal Road Works [1988] 170 ITR 500. There is thus no ground to distinguish that decision. Following that decision, this reference has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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