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Sandersons and Morgans Vs. Income-tax Officer, a Ward and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 143 of 1970
Judge
Reported in[1973]87ITR270(Cal)
ActsIncome Tax Act, 1961 - Sections 184(4), 184(7) and 246
AppellantSandersons and Morgans
Respondentincome-tax Officer, "a" Ward and ors.
Appellant AdvocateB. Das and ;Sailen Majumdar, Advs.
Respondent AdvocateD.K. Sen and ;Dipak Sen, Advs.
Cases ReferredPanna Lal Babulal v. Commissioner of Income
Excerpt:
- sabyasachi mukhakji, j. 1. the petitioner is a firm of solicitors. this firm is registered under the indian partnership act. according to the petitioner the petitioner-firm had been continuously carrying on profession as solicitors constituted as a partnership firm for a period of 4/5 years and even for lesser periods at a time. usually, according to the petitioner, at the end of each period if some of the partners retired, new partners were taken in the place of the retired partners and also in case of death of any one of them. during the period 1st january, 1956, to 3ist january, 1960, the petitioner-firm consisted of one david platt (since deceased), adwaita nath sil (since deceased), heramba nath bhattacharjee (since deceased), framjee cursetjee hierjeebhoy rustomjee, sudhir kumar de.....
Judgment:

Sabyasachi Mukhakji, J.

1. The petitioner is a firm of solicitors. This firm is registered under the Indian Partnership Act. According to the petitioner the petitioner-firm had been continuously carrying on profession as solicitors constituted as a partnership firm for a period of 4/5 years and even for lesser periods at a time. Usually, according to the petitioner, at the end of each period if some of the partners retired, new partners were taken in the place of the retired partners and also in case of death of any one of them. During the period 1st January, 1956, to 3Ist January, 1960, the petitioner-firm consisted of one David Platt (since deceased), Adwaita Nath Sil (since deceased), Heramba Nath Bhattacharjee (since deceased), Framjee Cursetjee Hierjeebhoy Rustomjee, Sudhir Kumar De Mullick and Basil Gill (since deceased). From 1st January, 1956, till 31st December, 1960, the petitioner-firm was constituted and/or evidenced by a partnership deed and was registered as a partnership firm under the Income-tax Act, 1922. On the expiry of the said period the said Basil Gill (since deceased) retired from the said partnership. The petitioner-firm during the period from 1st January, 1961, till 31st January, 1963, consisted of five partners mentioned above as well as one Subodh Kumar Mullick and Dina Nath Mullick. The said partnership firm was evidenced by a deed of partnership executed by the said partners on the 17th July, 1961. It would be necessary to set out certain relevant portions of the said partnership deed. Clause 3 of the said deed provides as follows :

'The partnership commenced on the 1st 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. '

2. Clause 4 is very material and is to the following effect:

'The death or retirement of any partner shall not dissolve the partnership as to the other partners. '

3. Clause 8 stipulated:

' The furniture, fans, fittings and fixtures, office equipment and motor cars (hereinafter called ' the movables') belonging to the firm on the 1st day of January one thousand nine hundred and sixty-one shall be taken to be of the value of Rs. 40,000 (rupees forty thousand) (increased by the cost of any movables bought and by the net cost of any movables sold by the previous partnership between the first day of January one thousand nine hundred and fifty-six and the thirty-first day of December one thousand nine hundred and sixty inclusive and reduced by seven and a half per cent. per annum as on the thirty-first day of December of each year of the previous partnership) and the parties hereto shall be entitled thereto as at the commencement of the partnership in the percentage shares specified in the second column of the table contained in Clause 12 hereof. The said sum of Rs. 40,000 (rupees forty thousand) increased and reduced as aforesaid shall be credited to a movables capital account in the books of the firm and the cost of any new or additional movables bought after the thirty-first day of December one thousand nine hundred and sixty and the net sale proceeds of any movables sold after that date shall be credited to such account.

The amount (other than cash) at credit of such account on the thirty-first day of December in each year shall be reduced by a sum equivalent to seven and a half per cent. per annum thereof by way of depreciation.

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 of his retirement or death (if he retires or dies on or before the thirtieth day of June in any year) or on the thirty-first day of December of the year of his retirement or death (if he retires or dies after the thirtieth day of June in any year) shall be taken into account as hereinafter provided in ascertaining the value of his interest in the firm.'

4. Clause 12 stated that 'the partners would be entitled to the goodwill and other assets of the firm and the net profits of the business would be divided among them and they would bear the losses as on and from the first day of January one thousand nine hundred and sixty-one in the manner indicated in the said clause.' The said clause further provided that ' such proportion of percentage shares becoming available on retirement of a partner (as hereinafter provided) as the majority of the then continuing partners would decide should be allocated for acquisition among the continuing partners and any additional partner or partners as the majority of the continuing partners might think fit to admit in the partnership and in the event of no additional partner or partners being then admitted into the partnership then the whole of such percentage share would be acquired by the continuing partners proportionately to their then existing shares or as they might otherwise mutually agree.'

5. Clause 24(a) is also relevant and provides as follows :

' If a partner shall die during the currency of the partnership and the surviving partners decide to continue to carry on the business of the firm either alone or in conjunction with an additional partner or partners, the surviving and additional partner or partners (if any) shall purchase the percentage shares of the deceased partner in such proportion as between themselves as they may mutually agree upon and in the event of the surviving partners deciding not to continue to carry on the business of the firm after the death of a partner or failing agreement among the surviving and additional partner or partners (if any) as to the proportion of the deceased partner's percentage shares which each of them is to purchase within six months after the death of the deceased partner, the firm shall stand dissolved as at the date of such death or as at the expiration of such period of six months as the case may be. In the event of the surviving partners either alone or with any additional partner or partners deciding to purchase the deceased partner's percentage shares and agreeing upon the number of such percentage shares each of them is to purchase, the provisions of Clause 23 shall apply mutatis mutandis to the purchase of the deceased partner's percentage shares.'

6. Clause 26 provides as follows :

' Notwithstanding any provision of law as between a retiring partner (or the representatives of a deceased partner) and the continuing and any incoming partners the retiring partner (or the estate of a deceased partner as the case may be) shall be liable for all income-tax and super-tax (including surcharges, if any) calculated on his share of the profits up to the last day of the month in which such retirement or death shall occur and which shall not already have been taxed after giving credit for all sums set aside by the firm on account of income-tax on his share of untaxed profits and shall keep the continuing and incoming partners saved harmless and indemnified against all claims for such taxes.'

7. The accounting year and/or previous year of the petitioner-firm for the purpose of assessment year under the Income-tax Act, 1922, as well as under the Income-tax Act, 1961, was and is the calendar year, from 1st January to 31st December each year. In respect of the assessment year 1962-63, the previous year was the calendar year 1961. The petitioner-firm was duly registered as a firm under the provisions of the Income-tax Act, 1961, for the said assessment year and/or the said previous year. Thereafter, according to the petitioner, there was no change in the constitution of the petitioner-firm and it had duly submitted a declaration to that effect in the prescribed form for the assessment year 1963-64 and the registration of the petitioner-firm for the assessment year 1962-63 continued to be effective for the assessment year 1963-64 and/or the previous year 1962. For each of the said assessment years the petitioner-firm was assessed to income-tax as a firm registered under the Income-tax Act, 1961, in the same manner as it had been treated for the previous assessment years under the Income-tax Act, 1961. On the 7th December, 1963, Sri Heramba Nath Bhattacharjee, one of the partners of the petitioner-firm, died. According to the petitioner the surviving partners continued to carry on the business of the petitioner-firm in terms of the said partnership deed for the remaining period of the said partnership agreement, that is to say, 31st December, 1963, without any fresh agreement. The petitioner contends that there was no change in the constitution of the petitioner-firm before the close of the business on 31st December, 1963. According to the petitioner, the said partnership deed dated 17th July, 1961, continued to remain in force and governed the rights and obligations of the said surviving partners as well as of the said deceased partners in all matters including their shares of the profits, losses and assets in accordance with the provisions of the partnership deed dated 17th July, 1961, which remained unaltered for the said agreed period. At the close of the business on the 31st December, 1963, the said David Piatt Dunderdale retired from the partnership. The petitioner further states that the partners under the said partnership deed dated 17th July, 1961, duly filed their individual returns of income from the petitioner-firm comprising the total net profit or income of the petitioner-firm allocated to and distributed amongst the partners according to their respective shares and made advance payments of taxes including those on self-assessment basis totalling Rs. 1,05,763.45. A new partnership deed was executed on the 14th May, 1964, for a period of 4 years. The said firm evidenced by the deed dated 14th May, 1964, was duly registered under the Income-tax Act, 1961. On the 29th June, 1964, the said surviving partners of the petitioner-firm for the calendar year 1963, after the death of Heramba Nath Bhattacharjee, as mentioned hereinbefore, duly filed an estimated return for the assessment year 1964-65 in respect of the previous year 1963. At that time the accounts of the petitioner-firm for the year 1963 had not been audited by the auditors, Messrs. Price Waterhouse Peat & Company. The said estimated return was submitted to the Income-tax Officer, ' A' Ward, District III(1), Calcutta, being respondent No. 1. Along with the said return a declaration, as prescribed, according to the petitioner, under Section 184(7) of the Income-tax Act, was filed and the prescribed form which was duly submitted was duly signed by the surviving partners in the year 1963. The petitioner has annexed a copy of the declaration form. The said declaration form is dated 29th June, 1964, and is signed by David Platt Dunderdale, Adwaita Nath Sil, Framjee Cursetjee Heerjeebhoy Rustomjee, Sudhir Kumar Dey Mullick, Subodh Kumar Mullick and Dinanath Mullick. The said form stated that the firm had been granted registration for the assessment year 1962-63 by an order dated 12th May, 1964, passed by the Income-tax Officer, 'A' Ward, District III(1), and that there had been no change in the constitution of the firm or the shares of the partners since the last day of the previous year relevant to the assessment year 1962-63 up to the last date of the previous year relevant to the assessment year 1964-65 or the date of dissolution of the firm. It was further stated that the information given was complete and correct. The said declaration was given in Form No. 12 which was under rule 24 of the Indian Income-tax Rules, 1962. According to the petitioner in September, 1964, the petitioner-firm filed another estimated return for the year 1964-65. Price Water-house Peat & Co., Chartered Accountants, audited the accounts of the petitioner-firm for the year 1963, and submitted their report dated 9th February, 1965. The summary of the partner's current accounts and distribution of reserves, profits, etc., for the year ending 31st December, 1963, show that the auditors treated the said Heramba Nath Bhattacharjee, deceased, as a partner of the petitioner firm till 31st December, 1963. On the 23rd August, 1968, the petitioner-firm submitted to respondent No. 1, a revised return for the assessment year 1964-65, with regard to the calendar year 1963. In the revised return in view of the provisions of the partnership deed dated 17th July, 1961, all the partners named in the said deed including Heramba Nath Bhattacharjee, deceased, were shown as partners during the year 1963. Thereafter, according to the petitioner, in the course of interview with the Income-tax Officer in connection with the assessment proceedings for the assessment year 1964-65, the petitioner-firm's representative was informed by the said Income-tax Officer that the application for the continuation of registration by the submission of declaration in Form No. 12 was not traceable.

8. Thereupon the petitioner-firm wrote a letter dated 2Ist November, 1968, stating that Form No. 12, dated 29th June, 1964, was submitted along with the estimated return filed in June, 1964. By the said letter the Income-tax Officer was further informed that the petitioner-firm's assistant-in-charge of the particular section had left the employment and the relevant office records were mislaid and, as such, the petitioner-firm was unable to trace the receipt evidencing the filing of the said Form No. 12. Accordingly, along with the said letter the petitioner-firm submitted its office copy of the said declaration in Form No. 12, for the assessment year 1964-65 to validate registration in accordance with the provisions of the Income-tax Act, 1961, in case the original could not be traced in the office of the Income-tax Officer. According to the petitioner the original as well as the office copy of the said declaration in Form No. 12 had been duly signed by all the surviving partners as appearing in the said partnership deed dated the 17th July, 1961. Thereafter there was discussion between the Income-tax Officer and the representative of the petitioner and the petitioner wrote a letter dated 5th December, 1968, a copy whereof is annexed with the petition. In reply the Income-tax Officer informed the petitioner that the petitioner should make a mercy petition for condonation of delay. By a letter dated 9th January, 1969, the petitioner-firm wrote to the Income-tax Officer on the lines suggested by the Income-tax Officer. On the 17th March, 1969, the Income-tax Officer assessed the net total income of the petitioner-firm for the assessment year 1964-65 treating the petitioner-firm as unregistered for the relevant assessment year. The Income-tax Officer issued notices to the partners and to the executors or heirs of the deceased partners under the said deed of partnership dated 17th July, 1961, to take refund of the said advance taxes paid by the partners aforesaid. Along with the said assessment order dated 17th March, 1969, the respondent No. 1 made an order. Inasmuch as the said order is the subject-matter of impugned challenge in this application under Article 226 of the Constitution it would be necessary to set out the said order :

' Order regarding Regulation Under Section 184(4).

During the accounting year following the death of one of the partners on the first week of December, 1963, there was a change in the constitution of the firm. It was found that the assessee has not submitted the original instrument of partnership deed during the accounting year. Hence registration is refused for the year.'

9. In the said order under Section 184(4) of the Income-tax Act, 1961, as mentioned hereinbefore, it was stated that there was a change in the constitution of the firm during the first week of December, 1963, by the death of one of the partners--death of Shri Heramba Nath Bhattacharjee in this case. It was stated in the said order that the assessee had not submitted the original instrument of partnership deed during the accounting year. Hence the registration was being refused. Thereafter, the Income-tax Officer issued the notice of demand for payment of taxes of Rs. 2,77,362, as the tax payable for the assessment year 1964-65 by the petitioner-firm. By a letter dated 3rd April, 1969, the petitioner-firm applied to the Income-tax Officer for rectification of the said order dated 17th March, 1969, refusing registration of the petitioner-firm. The reasons for which rectification was sought have been mentioned in the said letter dated 3rd April, 1969, copy whereof has been annexed to the petition. Thereafter, no order has been passed rectifying the order. The petitioner preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner passed an order on the 28th January, 1970, to the following effect:

' Appellate order and ground of decision.

This is an appeal against order under Section 184(4) of the Income-tax Act, 1961, refusing registration to the appellant for the assessment year 1964-65.

2, Since an order under Section 184(4) cannot be appealed against under Section 246, I am not in a position to interfere with the order of the Income-tax Officer. Under the circumstances, the appeal is dismissed.'

10. As mentioned hereinbefore, being aggrieved by the aforesaid two orders the petitioner moved this application under Article 226 of the Constitution.

11. Three questions require determination in this case, namely, firstly, in the facts and circumstances of this case, whether there was a change in the constitution of the firm prior to 31st December, 1963; secondly, was the order passed by the Income-tax Officer on 17th March, 1969, proper and valid; and, thirdly, was the order of the Appellate Assistant Commissioner in accordance with law. Special provisions applicable to firms, so far as the assessment of firms is concerned, are provided by Section 182 to Section 189 of the Income-tax Act, 1961. Section 182 provides that notwithstanding anything contained in Sections 143 and 144 and subject to the provisions of Sub-section (3), in the case of a registered firm, after assessing the total income of the firm, the income-tax payable by the firm itself shall be determined and the share of each partner in the income of the firm shall be included in his total income and assessed to tax accordingly. If such share of any partner is a loss it shall be set off against any other income or carried forward and set off according to the provisions of Sections 70 to 75 of the Act. Section 183 provides for the assessment of an unregistered firm. Section 184 provides for an application for registration of a firm. It would be necessary to set out the provisions of Sections 184 and 185.

Section 184:

' (1) AN application for registration of a firm for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm if--(i) the partnership is evidenced by an instrument; and (ii) the individual shares of the partners are specified in that instrument.

(2) Such application may, subject to the provisions of this section, be made either during the existence of the firm or after its dissolution.

(3) The application shall be made to the Income-tax Officer having jurisdiction to assess the firm, and shall be signed-

(a) by all the partners (not being minors) personally; or

(b) in the case of a dissolved firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased,'

Section 185:

' On receipt of an application for the registration of a firm, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and-

(a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year;

(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm.

(2) The Income-tax Officer shall not reject an application for registration merely on the ground that the application is not in order, but shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation.

(3) If the defect is not rectified within such time, the Income-tax Officer may reject the application.'

12. Section 186 deals with the cancellation of registration. It provides that if, where a firm has been registered or its registration has the effect under Sub-section (7) of Section 184 for an assessment year, the Income-tax Officer was of opinion that during the previous year no genuine firm was in existence as registered, he might, after giving the firm a reasonable opportunity of being heard and with the previous approval of the Inspecting Assistant Commissioner, cancel the registration of the firm for the assessment year. It also provides for consequential amendment of the assessment. Section 187 provides for changes in the constitution of the firm and states that where at the time of making an assessment under Section 143 or Section 144 it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment. Sub-section (2) of Section 187 provides that:

' For the purposes of this section, there is a change in the constitution of the firm-

(a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change; or

(b) where all the partners continue with a change in their respective shares or in the shares of some of them.'

13. Section 188 deals with succession of one firm by another firm and Section 189 deals with the firm dissolved or business discontinued. The expression ' constitution of the firm ' is not defined in the Income-tax Act, 1961. It was also not defined in the Indian Income-tax Act, 1922. Sub-section (2) of Section 187 provides a meaning to the expression ' change in the constitution of the firm', for that section. The expression 'constitution of the firm ' is also not defined in the Partnership Act though in Sections 17, 38 and 47 of the Indian Partnership Act reference is made to the said expression 'constitution of the firm '. Counsel for the petitioner contended that every change was not a change of the constitution of the firm for the purpose of the Income-tax Act, 1961, or for the purpose of the provisions of Section 184 or Section 185 of the Income-tax Act, 1961. According to counsel for the petitioner ' constitution of the firm ' is dependent upon the agreement between the partners. If the agreement of the parties provided that the death or retirement of one of the partners would not necessarily affect the structure and the function of the partnership firm, then according to counsel for the petitioner, it could not be contended unless there was a contrary indication in the Income-tax Act itself simply that by mere physical death a change had occurred in the constitution of the firm. Every alteration in the partnership of the firm was not contemplated by the expression 'change in the constitution of the firm' under Section 184 or Section 185 of the Income-tax Act, 1961. Constitution of a firm,--indeed constitution of anything--was a matter sometimes of very wide import. But, whether in a particular context the expression should be construed in that wider import or not, would depend on the purpose for which that expression had been used. Counsel for the petitioner contended that every minor alteration which did not affect the revenue or the tax liability would not be ' change in the constitution of the firm ' as contemplated in Sections 184 and 185 of the Partnership Act. In this connection, counsel for the petitioner drew my attention to the relevant passages on construction of statutes. He referred to Maxwell on the Interpretation of Statutes, 10th edition and relied on the observations appearing at page 76 of the said book. Reliance was placed also on the decision in the case of Bearmans Ltd. v. Metropolitan Police District Receiver, [1961] 1 W.L.R. 634 (C.A.) and the observations appearing at page 655. There the court observed that the word ' interested ' was not a word which had any well-defined meaning and anybody who was asked what it meant would at once want to learn the exact context in which it was used before he could venture any opinion. It might mean a direct financial interest on the one hand, and on the other hand it might mean nothing more than the ordinary human interest which everybody had in the outcome of the proceedings in which he was likely to be a witness. Just as in ordinary speech one would require to know the context, so in construing the word in an Act of Parliament it was essential --more necessary in this case than in most--to look at the scope and purpose of the Act. Reliance was also placed on the decision in the case of Lion Mutual Marine Insurance Association Ltd. v. Tucker, [1884] 12 Q.B.D. 176 (C.A.) and reliance was placed at the observations appearing at page 186. There Brett M.R. observed that whenever one had to construe a statute or document, one did not construe it according to the mere ordinary general meaning of the. words but according to the ordinary meaning of the words as applied to the subject-matter with regard to which they were used, unless there was something which obliged one to read them in a sense which was not their ordinary sense in the English language. Reliance was also placed on the decision in the case of Legal Aid Committee No. 1. Ex parte Rondel, [1967] 2 Q.B. 482. It was contended that the expression ' change in the constitution of the firm ' should receive a beneficial construction. It was next contended that the ground upon which the order dated 17th March, 1969, had been made was not proper because Section 184(4) did not contemplate passing of an order in the manner done. Section 184(4) was in respect of an application for registration. In the instant case there was no application for registration but only a declaration had been given in accordance with the legal requirements for firms which had already been registered. It was contended that the order, having been passed by the Income-tax Officer in the manner, had deprived the petitioner of his right to move in appeal. It was, thirdly, contended that in the order there was no discussion on the question as to whether, in the facts and circumstances of the case, there was any change in the constitution of the firm, but the order proceeded on the basis that the original copy of the registration of the partnership deed had not been: supplied. It was submitted that a new application with fresh grounds should have been made. On the other hand, counsel for the petitioner, however, contended that in view of the facts of this case and the clauses mentioned in the partnership deed, there was no change in the constitution of the firm. The firm continued to be the same up to the end of 1963, and the rights and liabilities of the partners were the same till the end of 1963.

14. Counsel for the respondents on the other hand contended that in the facts and circumstances of the case and in view of the death of Heramba Nath Bhattacharjee, there was in fact and in effect a change in the constitution of the firm. It was contended, secondly, that the application was not incompliance with rule 22 of the Income-tax Rules, 1962, and Form No. 12, inasmuch as the application was not signed by all the partners. Reliance was also placed on several decisions which I shall note later.

15. As mentioned hereinbefore, in the instant case, the main question of substance is what is meant by 'the change in the constitution of the firm '. The said expression is not defined either in the Income-tax Act or in the Partnership Act. Therefore, the expression ' change in the constitution of the firm ' must be construed in the light of the ordinary meaning unless the language of the section or the purpose of the Act compels one to hold otherwise. ' Change in the constitution of the firm ' normally and ordinarily would mean every alteration in the set-up of the firm, viz., death, retirement, incapacity of partners, alteration of the shares of the partners in the firm, etc. Whether any particular alteration would amount to a change in the constitution of the firm would depend upon the context of the use of that expression. Partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all, according to the definition of the Partnership Act. Therefore, constitution of the firm is a matter of agreement between the parties, subject, however, to the fact that the parties cannot contract out of the legal obligations. In this context the contract between the parties, viz., the instrument of partnership deed dated 17th July, 1961, has to be referred. Clauses 3 and 4 indicate that on the death of a partner the business would continue and on the death or retirement of a partner, the partnership would not be dissolved as between the other partners. Under Section 42 of the Partnership Act subject to the contract between the parties a firm is dissolved on, inter alia, the death of a partner. But, change in the constitution of a firm can occur even without dissolution--dissolution is not the only change in the constitution of a firm. Clauses 3 and 4 of the partnership deed, in my opinion, fall short of providing that on the death of a partner there would be no change in the constitution of the firm. On the other hand these clauses in my opinion indicate that on the death or retirement of a partner there would be change 'in- the constitution of the firm but the effect of such changes of death or retirement is limited to a certain extent in the manner indicated in the different provisions made in the different clauses of the partnership deed, viz., clauses 2, 3 and 4. Equally indicative of the same intention is clauses 10, 24 and 26. I, therefore, find nothing in the agreement between the parties to indicate that by the death of a partner there would be no change at, all in the constitution of the firm. I also find nothing in the purpose of the Income-tax Act or in the context of Section 184 of the Act any indication of the fact that by death or retirement of a partner there would be no change in the constitution of a firm. On the other hand, Section 187, in my opinion, is an indication of the fact that the changes by death or retirement of the partners would be a relevant factor so far as the purpose of the Income-tax Act is concerned. In this case, counsel for the respondents contended that Sub-section (2) of Section 187 was an indication of the fact that in case of death, there would be a change in the constitution of the firm. To this, counsel for the petitioner contended that that was an indication only for the limitation purpose of that section. It is true that the definition provided in Sub-section (2) of Section 187 is for a limited purpose, but it is also true that the expression ' cease to be partners ' cannot indicate a further change by the death, which is covered by the ordinary connotation of that expression. But, having regard to the purpose of the Act and having found nothing to indicate to the contrary to the ordinary meaning in this case, I must construe the expression ' constitution of the firm ' by its ordinary connotation and construe by that connotation that death would certainly indicate a ' change in the constitution of the firm ',

16. Counsel for the respondents contended that the application was not in conformity with the Rules, inasmuch as it was not signed by all the partners. , Counsel for the petitioner on the other hand contended that the meaning of the section should not be construed with reference to the Rules framed under the Act. In this connection counsel for the petitioner is right because of the provision under which Rules have been. framed under the Income-tax Act, 1961, unlike the Indian Income-tax Act, 1922. Rules have been framed under the Income-tax Act, 1961, by virtue of Sections 295 and 296 of the Act. It is not provided in those sections that rules when framed become part of the statute. In the Indian Income-tax Act, 1922, by Sub-section (4) of Section 59 it is provided that Rules framed under the Act would become part of the statute. Such Rules, that is, the Rules which become part of the statute, should be construed in the manner which would lead to a harmonious construction and for that purpose, it would be relevant to refer to the Rules. But, in the facts and circumstances of this case, as such Rules do not form part of the statute and as such it would not be proper to refer to the Rules for the construction of the statute. In that view of the matter if it was possible for me to hold that there was no ' change in the constitution of the firm ' then in that case it would have been necessary for me to seriously consider the question as to whether the application in this case was in compliance with the requirement of law or not. Counsel for the respondents contended that registration is a right given to the assessee. In order to exercise that right, the assessee must strictly comply with the provisions of the Act and Rules. If the expression ' change in the constitution of the firm.' did not cover death in the facts and circumstances of this case, then it might have been possible to hold that the application was in order. But, in the view I have taken already, it is not necessary for me to consider this aspect any further. I must, therefore, also hold in the instant case that the application was not in conformity with the form, viz., it was not signed by all the partners.

17. The next point that was urged was that the order was under wrong heading. Section 184(4) provides for an application for registration. Sub-section (7) of Section 184 provides, however, that registration granted to any firm for any assessment year shall have effect for every subsequent year provided certain conditions are fulfilled. As a matter of fact no separate order under Section 184(7) is required. It is necessary only to refer to that fact if it is found after giving the assessee a reasonable opportunity that the assessee has not complied with the requirement of Section 184(7). Then at the time of the assessment order by a separate order the Income-tax Officer should record that fact and when the assessee prefers an appeal from the assessment, the assessee is entitled to contend that that finding of the Income-tax Officer is invalid. In view, however, of the fact that there was no appeal either from an order under Sub-section (4) of Section 184, or Sub-section (7) of Section 184, the order of the Appellate Assistant Commissioner cannot be considered to be without jurisdiction.

18. Counsel for the petitioner drew my attention to a decision of the Lahore High Court in the case of Rai Saheb Chiranjilal & Sons v. Commissioner of Income-tax, [1937] 5 I.T.R. 44 (Lah.), a decision of this court in the case of Moolji Sicka, In re (No. 2), [1938] 6 I.T.R. 234 (Cal.), a decision in the case of In re Makerwal Colliery, [1942] 10 I.T.R. 422 (Lah.), and a decision in the case of Panna Lal Babulal v. Commissioner of Income-tax, [1969] 73 I.T.R. 503 (All.). In the view, I have taken, it is not necessary for me to refer to the aforesaid decisions.

19. In the aforesaid view and for the reasons mentioned hereinbefore, I am of the opinion that the petitioner is not entitled to any order in this application. The application, therefore, fails and is accordingly dismissed. The rule nisi is discharged and the interim order is vacated. There will be no order as to costs. There will be stay of operation for four weeks after the Christmas vacation.


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