Skip to content


Commissioner of Income-tax Vs. Chandigarh Bottling Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 105 of 1977
Judge
Reported in(1986)55CTR(P& H)111; [1986]160ITR780(P& H)
ActsIncome Tax Act, 1961 - Sections 183 and 185
AppellantCommissioner of Income-tax
RespondentChandigarh Bottling Co.
Appellant Advocate Ashok Bhan and; Ajay Mittal, Advs.
Respondent Advocate G.C. Sharma,; S.S. Mahajan and; Lakhinder Singh, Adv
Excerpt:
.....of passing of the said order. - 6. also it was not disputed that cancellation of the assessment by the commissioner has the affect of setting aside the order of continuation of the registration as well......that after completing the individual assessment of the partners where share income from the assessee-firm was included as their income, the firm could be denied the benefit of registration and assessed in the status of an ' unregistered firm ' ?4. whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that setting aside of the assessment by the commissioner of income-tax has the effect of setting aside the order of continuation of registration '3. on question no. 1, the contention of the revenue was that as there was a change in the constitution of the firm on the death of teja singh, an application in form no. 11a should have been filed and in its absence the continuation of the registration could not be allowed on the submission of.....
Judgment:

S.P. Goyal, J.

1. The assessee, a partnership firm, was constituted by a deed dated January 14, 1967. It was a partnership at will by virtue of Clause 9 but not liable to be dissolved on the insolvancy, death or severance of any partner and the legal heirs were entitled to be taken as partners in place of the deceased partner as provided in Clause 14 of the said agreement. The firm was allowed registration for the year ending March 31, 1968, and its continuance for year ending March 31, 1969.

2. Teja Singh, one of the partners, died on March 29, 1970, and for the assessment year 1970-71, the firm filed, two returns, one for the period from April 1, 1969, to March 29, 1970, and the second for the remaining two days of the year ending on March 31, 1970. Along with the return, declaration in Form No. 12 was also filed for allowing continuation of the registration of the firm up to March 29, 1970. The return for the two days was submitted as an unregistered firm. The Income-tax Officer accepted the declaration contained in Form No. 12 and allowed continuation of the registration for the period up to March 29, 1970. For the remaining period of two days, the provisions of Section 183(b) were invoked and the firm was treated as a registered firm holding that it would be beneficial for the Revenue to do so. Both the periods were thus clubbed together and only one assessment made. However, the Commissioner of Income-tax being of the view that on the death of Teja Singh, there was a change in the constitution of the firm and as such it ought to have applied for fresh registration in accordance with the provision of Section 184(8), invoked his powers under Section 263, set aside the order of the Income-tax Officer holding the same to be erroneous and prejudicial to the interests of the Revenue. In the result, the case was remanded to the Income-tax Officer for making a fresh assessment treating the assessee as an unregistered firm. Aggrieved thereby, the assessee went in appeal before the Tribunal who reversed the order of the Commissioner being of the view that there was no change in the constitution of the firm up to March 29, 1970, and even thereafter it continued to be in existence by virtue of the provisions of Clause 14 of the partnership deed. On an application made by the Revenue, the Tribunal has referred the following four questions for our opinion :

' 1 Whether, on the facts and in the circumstances of the case, the Tribunal was right in law vacating the order of the Commissioner of Income-tax by holding that the firm constituted by the deed dated January 14, 1967, continued up to March 31, 1970, even after the death of Teja Singh on March 29, 1970, and as there was no change in the constitution of the firm, the declaration in Form No. 12 was correct and thus the Income-tax Officer's order allowing continuation of the registration was not erroneous and prejudicial to the interests of the Revenue ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in vacating the order of the Commissioner of Income-tax by holding that even if a change in the constitution had occurred on the death of Teja Singh and an application for registration in Form No. 11A was not erroneous when by accepting the declaration in Form No. 12, registration was allowed in substance and the defect, if any, in the application was impliedly condoned ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that after completing the individual assessment of the partners where share income from the assessee-firm was included as their income, the firm could be denied the benefit of registration and assessed in the status of an ' unregistered firm ' ?

4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that setting aside of the assessment by the Commissioner of Income-tax has the effect of setting aside the order of continuation of registration '

3. On question No. 1, the contention of the Revenue was that as there was a change in the constitution of the firm on the death of Teja Singh, an application in Form No. 11A should have been filed and in its absence the continuation of the registration could not be allowed on the submission of declaration in Form No. 12. Reliance for this contention was placed on a decision of the Orissa High Court in CIT v. Panda and Co. : [1980]121ITR342(Orissa) , However, the plea raised is wholly misconceived. The assessee correctly submitted the declaration in Form No. 12 because the continuation of the registration was claimed only up to March 29, 1970, till which date, admittedly, there was no change in the constitution of the firm. For the remaining two days, there was a change in the constitution of the firm by the death of Teja Singh, although it continued to exist according to the terms of the partnership deed. A new partnership deed with the inclusion of the heirs of the deceased was executed on August 17, 1970, though the firm was constituted with effect from April 1, 1970. The Income-tax Officer, therefore, rightly allowed the continuation of the registration up to March 29, 1970, and to this extent, the decision of the Tribunal was correct. However, it went wrong in saying that there was no change in the constitution of the firm even after the death of Teja Singh on the ground that the firm was not to be dissolved and continued by virtue of Clause 14 of the partnership deed. Even though the firm continued, there was certainly a change in its constitution because Teja Singh had died and ceased to be a partner. As the Revenue was to be adversely affected if the assessment was made taking the assessee as an unregistered firm, the Income-tax Officer rightly invoked the provisions of Section 183(b) and made the assessment taking the assessee as a registered firm even for those two days. The decision relied upon by the Revenue in Pandaand Co.'s case : [1980]121ITR342(Orissa) is, therefore, distinguishable on facts. In that case, the assessee-firm was granted registration for the year 1967-68. During the assessment year 1968-69, one of the partners died and the firm was reconstituted with the inclusion of his widow as partner on March 30, 1968. The declaration in Form No. 12 was submitted by the firm to claim the continuation of registration. The Bench held that the assessee was required to apply in Form No. 11A and no registration could be granted on the filing of the declaration in Form No. 12. Obviously, this decision has no bearing on the present case because here the continuation of the registration was claimed up to March 29, 1970, till which date there was no change in the constitution of the firm. Consequently, question No. 1 is answered in the affirmative, that is, in favour of the assessee and against the Revenue, though partially on grounds different from those stated by the Tribunal.

4. On a correct analysis of the facts as stated above and the finding recorded by us, question No. 2 has lost all significance. If the finding would have been that, the continuation of the registration was sought after the death of Teja Singh, then application in Form No. 11A was required to be filed. In the absence of an application in the said form, the Income-tax Officer was not competent to grant registration to the newly constituted firm on the basis of the declaration in Form No. 12. Consequently, the first portion of question No. 2 that the Tribunal was right in law in vacating the order of the Commissioner of Income-tax is answered in the affirmative for the reasons recorded above but the latter part of the question is answered in the negative, that is, against the assessee and in favour of the Revenue.

5. Question No, 3, it was not disputed, is covered by a decision of this court in Jupiter Foundry and Machines (Knives) v. CIT , and is accordingly answered in the negative, that is, in favour of the Revenue and against the assessee.

6. Also it was not disputed that cancellation of the assessment by the Commissioner has the affect of setting aside the order of continuation of the registration as well. Question No. 4 is accordingly answered in favour of the assessee and against the Revenue. In the circumstances of the case, the parties are left to bear their own costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //