TMI Blog1976 (11) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... time, a partnership agreement was executed by and between these partners. We are concerned with the accounting year/previous year 1963, and assessment year 1964-65. In respect of this period there was an agreement of partnership in writing between seven persons which was executed on 17th day of July, 1961. As most of the arguments centred around some of the clauses of this agreement, we set out hereinbelow some of the relevant clauses Clause 3 : " The partnership commenced on the first day of January one thousand nine hundred and sixty-one and shall continue for a period of three years subject to the provisions hereinafter contained provided that if the business shall continue to be carried on after the expiration of the said period without any break, either by the parties hereto or by some one or more of them, the partnership shall not be deemed to have been dissolved at the expiration of the said period." Clause 4 : " The death or retirement of any partner shall not dissolve the partner-ship as to the other partners." Clause 8 : " On the retirement or death of a partner the amount at credit of such account on the thirty-first day of December preceding the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip agreement and the provisions made thereunder, it could not be said that there was any change in the constitution of the firm merely because of the death of Mr. Bhattacharjee. The main contention of Mr. Das was that upon the death of Mr. Bhattacharjee, in that particular year nobody was brought in as a new partner in the place and stead of Mr. Bhattacharjee. Further, he submitted that it was provided in the partnership deed itself that in the case of a partner dying after 1st of July of a particular year the accounting was to be made on the basis of the accounts for the period up to 31st of December of that particular year. In this contest Mr. Das referred to clause 8 which we have quoted hereinabove. According to Mr. Das, in ascertaining the value of Mr. Bhattacharjee's interest in the firm the accounts for the period up to 31st of December, 1963, have got to be taken into account. Under clause 4 of the agreement the death of Mr. Bhattacharjee did not dissolve the said partnership firm. No other person was brought in the firm upon the death of Sri Bhattacharjee in respect of the year 1963 and, accordingly, there could not be any change in the constitution of the firm. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he application shall be accompanied by a duplicate copy of the original instrument. (6) The application shall be made in the prescribed form and shall contain the prescribed particulars. (7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year : Provided that-- (i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted ; and (ii) the firm furnishes, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner. (8) Where any such change has taken place in the previous year, the firm shall apply for fresh registration for the assessment year concerned in accordance with the provisions of this section." Rule 22(5) of the Income-tax Rules, 1962 : The application shall be signed personally by all the partners (not being minors) in the firm as constituted at the date of the application and, in the case of a dissolved firm, personally by all the persons (not being minors) who were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm. If there were 7 partners as evidenced by the partnership agreement and if one of them dies, it cannot certainly be said that the partnership still consists of 7 partners. After his death, Mr. Bhattacharjee ceased to be a partner. There is one partner less in the partnership. Accordingly, there has been a change in the constitution of the firm. It is immaterial that no one was taken as a partner in the place of Mr. Bhattacharjee at the relevant time. It is also not relevant in this connection that the estate of the deceased partner got the benefit of the partnership up to the end of the relevant year. Mr. Das has relied on two decisions in support of his contention on this point. The first case cited by Mr. Das is the case of Dahi Laxmi Dal Factory v. Income-tax Officer [1976] 103 ITR 517 (All) [FB]. In our opinion, this case is of no assistance to Mr. Das. On the contrary, there are certain observations therein which go against his contention. In this case the effect of sections 31 and 32 of the Partnership Act and the effect of retirement of the partners was considered and after referring to various decisions it was observed that the legal position that emerges is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the firm. The latter contemplates the end of the contractual relationship between all the partners." In the facts and circumstances of this case, we have no hesitation in holding that though there was no dissolution of the firm on the death of Mr. Bhattacharjee and though for the purpose of accounting the relevant period was up to 31st December, 1963, there has been a change in the constitution of the partnership upon the death of Mr. Bhattacharjee on 7th December, 1963. In that view of the matter, proviso (i) to section 184(7) of the said Act was not satisfied and, accordingly, the appellants were not entitled to claim that the registration made in respect of the firm earlier should be continued or should, have been treated as existing in respect of the year 1963. They cannot claim to be assessed as registered firm for the year 1963 merely on the basis of the prior registration. In view of the conclusion we have arrived at on the first submission of Mr. Das, it is not necessary for us to go into the second question, i.e., the question whether the application was defective or not. As we have held that there has been a change in the constitution of the firm, there was no ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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