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TMI Blog1977 (12) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted under a deed of partnership dated September 1, 1966, with 5 partners and their profit sharing ratio was 1/5th each. That firm was granted registration for the year 1970-71 and 1971-72. During the accounting year relevant for the assessment year 1971-72, four out of five partners retired from the firm on June 30, 1970. The accounts were settled as amongst the partners and a release deed was executed on July 1, 1970, by the retiring partners. The said release deed states that the four partners had retired from the firm on receipt of a sum of Rs. 17,500 and the remaining partner, T. K. Joghee Gowder took over the rights and liabilities of the erstwhile partners in the firm. On the same day, the said Joghee Gowder formed a new firm, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent in the said order has been challenged in this writ petition. According to the learned counsel for the petitioner, four out of the five partners having retired on June 30, 1970, there remained only one partner, and as such the firm had ceased to exist, as one individual cannot constitute a partnership firm. The mere fact that on the same day, T. K. Joghee Gowder, who took over the business of the firm under the terms of the release deed dated July 1, 1970, executed by four retiring partners, took three other partners for the purpose of carrying on the business will not lead to the inference that the old partnership still continues. In the circumstances of this case, the old partnership and the new partnership are two different entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta v. Commissioner of Income-tax), a Division Bench of this court has observed : " The dissolution and reconstitution of a partnership are two different legal concepts. The dissolution puts an end to the partnership, but reconstitution keeps it subsisting, though in another form. A dissolution followed by some of the erstwhile partners taking over the assets and liabilities of the dissolved partnership and forming themselves into a partnership is not reconstitution of the original partnership. The partnership formed after the dissolution is a new partnership and not a continuation of the old partnership, for it would be a contradiction in terms to say that what ceased to exist was continued. A reconstitution of a firm of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax [1976] 104 ITR 160 (Mad). That was a case in which the dissolution was brought about by the death of one of the partners and another firm coming into existence by some of the surviving partners taking in other persons as partners. The court pointed out that a change in the constitution of a firm is different from the dissolution of the firm, that a change in the constitution of a firm can occur by reason of the death of the partner provided there are at least two surviving partners and the deed of partnership permits the continuation of the firm even after the death of the partner and that the words " ceasing to be partners " in section 187(2) of the Income-tax Act, 1961, would also include a case of death of a partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution of the firm and not merely on retirement of the partner and that retirement occurs only when one out of more than two partners severs his connection and the business is carried on by the remaining two or more partners. As already stated the impugned order proceeds on the basis that as there is no interregnum between the extinction of the old firm and the coming into existence of the new firm, the old firm should be taken to continue. Even if the extinction of the old firm and the constitution of the new firm took place simultaneously, in law it must be presumed that the retirement of the partners of the old firm preceded the constitution of the new firm, for, unless the old firm ceases to exist, a new firm cannot come into being. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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