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First Income-tax Officer Vs. Venkateswara Enterprises. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberI. T. APPEAL NO. 117 (BANG.) OF 1982 [ASSESSMENT YEAR 1978-79]
Reported in[1986]17ITD210(Mad)
AppellantFirst Income-tax Officer
RespondentVenkateswara Enterprises.
Cases ReferredT. v. Thyagasundara Mudaliar
Excerpt:
.....one of the partners out of two, firm was entitled to registration up to death of the partner. held : it is well settled that when there were only two partners, on the death of one of them the firm stands dissolved. the firm that comes into existence subsequently is entirely a new firm. in the instant case, there were only two partners and on the death of d, firm automatically stood dissolved. since one of partners died on 9-3-1978 out of the two, the firm ceasd to exist. hence, it is permissible to grant registration for the part of the previous year during which it existed. case law analysis : cit v. thyagasundra mudaliar (1981) 127 itr 520 (mad) applied. application : not to current assessment years. income tax act 1961 s.184 - orderper shri t. venkatappa, judicial member - the assessee-firm was constituted by a partnership deed dated 21-12-1976 with two partners, viz., shri t. dalegowda and b. mahadevaiah. shri dalegowda died on 9-3-1978. the accounting year of the firm was 31-3-1978. for the period from 9-3-1978 to 31-3-1978 there was no fresh deed. the assessee filed an application in form no. 11 seeking registration. the ito refused to grant registration on the ground that the partnership was not operative throughout the year and the fresh deed was executed only after the close of the accounting year. he treated the firm as unregistered firm. on appeal, the aac directed the ito to register the firm governed by the deed dated 21-12-1976. he followed the decision of the madras high court in addl. cit. v......
Judgment:
ORDER

Per Shri T. Venkatappa, Judicial Member - The assessee-firm was constituted by a partnership deed dated 21-12-1976 with two partners, viz., Shri T. Dalegowda and B. Mahadevaiah. Shri Dalegowda died on 9-3-1978. The accounting year of the firm was 31-3-1978. For the period from 9-3-1978 to 31-3-1978 there was no fresh deed. The assessee filed an application in Form No. 11 seeking registration. The ITO refused to grant registration on the ground that the partnership was not operative throughout the year and the fresh deed was executed only after the close of the accounting year. He treated the firm as unregistered firm. On appeal, the AAC directed the ITO to register the firm governed by the deed dated 21-12-1976. He followed the decision of the Madras High Court in Addl. CIT. v. Thyagasundara Mudaliar : [1981]127ITR520(Mad) . Against the same, the revenue has preferred this appeal.

2. The learned departmental representative strongly urged that the death of Shri Dalegowda on 9-3-1978 there was no fresh deed executed for the period 9-3-1978 to 31-3-1978. Hence, the firm is not entitled for registration. The learned counsel for the assessee submitted that since there were only two partners, on the death of one of them on 9-3-1978 the firm gets dissolved automatically and the assessee-firm is entitled for registration up to 9-3-1978. He placed reliance on the decision in Thyagasundara Mudaliars case (supra).

3. We have considered the rival submissions. It is well settled that when there were only two partners on the death of one of them the firm stands dissolved. In Thyagasundara Mudaliars case (supra) there were two partners in the firm. One of them died. On those facts, the Madras High Court held that on the death of one the partners, the firm automatically stood dissolved and, hence, no question of change in the constitution of the firm arose. The firm that came into existence subsequently was entirely a new firm. The above ratio squarely applied. In the instant case, there were only two partners and on the death of Shri Dalegowda the firm automatically stood dissolved. The firm is entitled for registration up to 9-3-1978. The decision in CIT v. Sri Rama Talkies : [1973]87ITR615(AP) does not help the revenue. That is a firm consisting of three partners and one of the partners died. The assessee claimed that the firm was the same throughout the year and filed a single return. It is on those facts, it was held that what is contemplated in the Act is registration of the firm for the entire assessment year if there is only one assessee during the whole year. In fact, in that case it was observed that where a firm ceased to exist or is succeeded by a different firm it may be permissible to grant registration for the assessment year in relation to the part of the previous year during which it existed. This decision, in fact, helps the assessee. In the instance case, since one of the partners died on 9-3-1978 out of two, the firm ceased to exist. Hence, it is permissible to grant registration to the part of the previous year during which it existed. Thus, we uphold the order of the AAC with the observation that the firm is entitled to registration up to 9-3-1978.

4 In the result, the a appeal fails and is dismissed.


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