TMI Blog1991 (2) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company, which was one of the partners of the said firm, has taken over all the assets and liabilities of the said firm as going concern. It was contended on behalf of the assessee before the learned CIT(A) that since the assessee company had undertaken to pay all the liabilities of the erstwhile firm, it had to make one such payment by way of income-tax of the erstwhile firm. The payment of income-tax liability of the predecessor concern should be allowed as a deduction in computation of taxable income in the hands of the assessee. The CIT(A) accepted the assessee's contention on the ground that such tax liabilities were of the predecessor firm and not of the appellant company. Hence, the same is allowable in view of judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the assessee supported the order passed by the CIT(A). He relied on the judgment of Hon'ble Supreme Court in the above referred case reported in (1985) 48 CTR (SC) 123 : 155 ITR 152. It was further contended that the view taken by the CIT(A) is also fortified by the judgment of Hon'ble Punjab Haryana High Court in the case of Dashmesh Transport Co. Pvt. Ltd. vs. CIT (1974) 93 ITR 275 (P H) and M.P. High Court judgment in the case of CIT vs. Sriram Prayagdas Mahadev Prasad (1982) 27 CTR (MP) 155 : (1983) 144 ITR 883 (MP). 5. We have carefully considered the rival submissions made by the learned representatives and have also gone through the various judgments relied upon by both of them. The judgment of Hon'ble Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) applies only in relation to tax levied on the assessee himself and does not include the payment of income-tax liability of predecessor firm. It is an undisputed fact that the assessee company was one of the partners of the erstwhile partnership firm styled as M/s Himson Textile Engg. Industries. A partnership firm under the Indian Partnership Act is not a distinct legal entity apart from the partners constituting it. It is the partners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets and liabilities to one of the partners, which flows upon dissolution of the firm is nothing but a mutual adjustment of rights between the partners and there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dashmesh Transport Co. Ltd. had taken over the assets and liabilities of another concern styled as M/s R. Ltd. That was a case where assets and liabilities had been taken over from a different person and was not a case of taking over of assets and liabilities by one of the partners from the erstwhile firm, in which the assessee was also one of the partners. This distinguishing feature is very vital in view of the fact that the Hon'ble Supreme Court had clearly held in the case of Malabar Fisheries and in several other cases saying that no transfer takes place when the assets and liabilities of the erstwhile firm are taken over by one of the partners upon its dissolution and money value of the respective shares of other partners is paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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