JUDGMENT
Bhargava, J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961 (hereinafter to be referred to as “the Act”), wherein the Income-tax Appellate Tribunal, Jaipur Bench, has referred the following question of law for the opinion of this court:
” Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Section 187(2) of the Income-tax Act, 1961, was not applicable in this case, and further that separate assessments be made on the two firms for the assessment year 1969-70 ? ”
2. The facts giving rise to this reference, briefly stated, are as follows:
3. The assessee, M/s. M. K. M. Moosa Bhoy Amin, is a registered firm constituted under a deed of partnership dated December 7, 1956, with the following five partners :
1. Shri Shamsuddin
2. Shri Saifuddin
3. Shri Saifuddin (Sunelwala)
4. Shri Hakimuddin
5. Shri Fatima Bai
4. One of the partners, namely, Shamsuddin, died on June M, 1968, and, thereafter another partnership deed was executed on June 13, 1968, among the remaining four partners of the earlier firm and Shri Kutbuddin and Shri Kalimuddin, sons of Shri Shamsuddin, deceased partner, and it commenced its business on or from June 12, 1968. The assessee filed two returns–one for the period from November 3, 1967, to June 11, 1968, and the other for the period from June 12, 1968, to October 21, 1968. The ITO was of the opinion that there was only a change in the constitution of the firm and, therefore, two separate assessments could not be made and, hence, he clubbed the income for both the periods in that assessment year. The assessee preferred an appeal to the AAC. The AAC agreed with the contention of the assessee that after the death of a partner the firm was automatically dissolved since there was no clause in the partnership deed for continuity of the firm and a new partnership came into being on and from June 12, 1968. Therefore, he was of the view that two separate assessments should have been made for the two different entities for the two periods and directed the ITO accordingly.
5. The Department appealed to the Income-tax Appellate Tribunal and contended that the case was covered by Section 187(2) of the Act and, therefore, there should have been only one assessment and, in this connection, relied on the following cases :
(1) Shivram Poddar v. ITO [1964] 51 ITR 823 (SC).
(2) R. B. Jessa, Ram Fateh Chand v. CIT [1971] 81 ITR 409 (All).
(3) CIT v. K. H. Chambers [1965] 55 ITR 674 (SC).
On behalf of the assessee, reliance had been placed on :
(1) Bhausa Ganusa Pawar and Co. v. CIT [1966] 62 ITR 75 (Bom).
(2) Sita Ram Har Govind v. CIT [1971] 79 ITR 575 (All).
6. However, the Tribunal found that on the death of Shri Shamsuddin, one of the partners, the assessee-firm stood automatically dissolved by operation of law and altogether a new firm came into being on and from June 12, 1968, and, therefore, Section 187(2) of the Act will not apply and dismissed the appeal.
7. The Department moved an application under Section 256(1) of the Act for making a reference to this court and the Tribunal referred the above-mentioned question of law for opinion to this court.
8. We have heard Shri R. N. Surolia, the learned counsel for the Department, and Shri N. K. Jain, the learned counsel for the assessee, and have gone through the record of the case and also the various authorities submitted at the Bar.
9. The learned counsel for the Revenue has placed reliance on a Full Bench decision, consisting of five judges, of the Punjab High Court in Nandlal Sohanlal v. CIT [1977] 110 ITR 170 (P & H) [FB], wherein it has been held by majority relying on the Supreme Court’s judgments in
(1) C. A. Abraham v. ITO [1961] 41 ITR 425, and
(2) CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739,
that where a special provision was made in a taxing statute in derogation of the provisions of the Partnership Act, effect should be given to it and where no such provision had been made, liability for payment of tax could be determined by taking into consideration the general provisions of the Partnership Act. Therefore, where the provisions of the I.T. Act are clear, resort cannot be had to the provisions of another statute like the Partnership Act. Therefore, Section 187 of the I.T. Act overrides the provisions of Section 42 of the Partnership Act and, therefore, the Tribunal was wrong in holding that there should be two assessments. The Punjab High Court followed its earlier view in Hoshiarpur Electric Supply Co. v. CIT [1971] 79 ITR 164 (P & H), and also relied on Karupukula Suryanarayana Shetty and Sons v. CIT [1973] 92 ITR 141 (Mys) and Addl. CIT v. Visakha Flour Mills [1977] 108 ITR 466 (AP) [FB] and dissented from the Allahabad High Court decisions in CIT v. Shiv Shankar Lal Ram Nath [1977] 106 ITR 342 (All) and Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All) [FB].
10. Whereas, the learned counsel for the assessee has relied on the following authorities :
(1) CIT v. Sant Lal Arvind Kumar [1982] 136 ITR 379 (Delhi), which has taken a contrary view and has relied on earlier decisions reported in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517 (All) [FB], CIT v. Kunj Behari Shyam Lal [1977] 109 ITR 154 (All)[FB], Addl, CIT v. Dilsukh Rai Madho Prasad [1977] 108 ITR 299 (All), Kaithari Lungi Stores v. CIT [1976] 104 ITR 160 (Mad), Mavukkarai (N.) Estate Tea Factory v. Addl. CIT [1978] 112 ITR 715 (Mad), Addl. CIT v. Thyagasundara Mudaliar [1981] 127 ITR 520 (Mad), Addl. CIT v. Vinayaka Cinema [1977] 110 ITR 468 (AP) [FB] and Mathurdas Govardhandas v. CIT [1980] 125 ITR 470 (Cal) and has dissented from the earlier view of the Punjab High Court reported in Dharam Pal Sat Dev v. CIT [1974] 97 ITR 302 (P & H), Jupiter Foundry and Machines (Knives) v. CIT [1977] 109 ITR 92 (P & H), Addl. CIT v. Visakha Flour Mills Ltd. [1977] 108 ITR 466 (AP) [FB] and Nandlal Sohanlal v. CIT [1977] 110 ITR 170 (P & H) [FB].
11. Similarly, the Allahabad High Court in CIT v. Satya Deo Omprakash [1982] 136 ITR 720, has followed its earlier decisions and has held that where a firm is dissolved either by agreement of partners or by operation of law on the death of a partner and another firm takes over the business Section 187(2) will not come into operation and two separate assessments will have to be made.
12. The same view has been taken by the Madhya Pradesh High Court in Ganesh Dal Mills v. CIT [1982] 136 ITR 762, in which they have dissented from the view of the Punjab High Court in Nandlal Sohanlal v. CIT [1977] 110 ITR 170 and relied on the decisions of the Andhra Pradesh, Allahabad and Madras High Courts, The Orissa High Court in I. Ramakrishnaiah & Sons v. CIT [1978] 111 ITR 296, has also taken the same view and has agreed with the view expressed by the Delhi and the Allahabad High Courts and taken a contrary view from that of the Punjab High Court.
13. Thus, we find that the view taken by the Punjab & Haryana High Court has been dissented by the High Courts of Allahabad, Calcutta, Andhra Pradesh, Delhi, Gujarat and Madras. At one time, the view of the Andhra Pradesh High Court was also in line with the Punjab & Haryana High Court, but in Addl. CIT v. Vinayaka Cinema [1977] 110 ITR 468 (AP) [FB] (consisting of five Judges), it has overruled its earlier view taken in Addl. CIT v. Visakha Flour Mills Ltd. [1977] 108 ITR 466 (AP) [FB], and had followed the view taken by the Allahabad, Madras and Gujarat High Courts.
14. We have also given our thoughtful consideration to the arguments and have gone through the various decisions of different High Courts and we are in agreement with the view taken by the Delhi, Allahabad, Madras, Orissa, Madhya Pradesh, Andhra Pradesh and Gujarat High Courts and dissent from the view taken by the Punjab & Haryana High Court. Since the matter has already been discussed at length in various judgments of the High Courts noted above, especially in CIT v. Sant Lal Arvind Kumar [1982] 136 ITR 379 (Delhi), we do not think it necessary to discuss the matter in detail. The assessee-firm dissolved automatically on the death of one of its partners, Shri Shamsuddin, on June 11, 1968, in terms of Section 42 of the Partnership Act and a new partnership came into existence with effect from June 12, 1968, and was governed by the new partnership deed executed on June 13, 1968, and, therefore was a separate entity altogether. Therefore, Section 187(2) of the Act was not applicable in the present case and there should have been two separate assessments of the two different firms in the assessment year 1969-70.
15. Therefore, we answer the question in the affirmative.
