TaxTMI 
TaxTMI 
TaxTMI 
1980 (11) TMI 96
X X X X Extracts X X X X
X X X X Extracts X X X X
....at a new firm came into existence on 1st February, 1975. Two separate returns for both the periods were filed. The constitution of the firm immediately before and after 1st February, 1975 were as under: S. No. Name 1st December, 1974 . 1st February, 1975 . . Deed Share . Deed Share 1. L. K.A. Jeyaram 7 . 15 2. P.Balasubramaniam 3 . 5 3. P. Bommiah 5 . 10 4. V. Soundppan 3 . 5 5. V. Krishnaswami 3 . 5 6. M. Durai 3 . 5 7. G. Ganesan 4 . 7 8. R. Durairaj 3 . 5 9. A. G. Amaravathi 3 . 5 10. V. Amaravathi 3 . 5 11. J. Parvathi 3 . 5 12. J. Vasanthakumar 2 . 5 13. A. Balasubramani 2 . 3 14. N. P. Nachiappan 1 . 2 15. R. Parthasarathi 5 . 4 16. V. Rajagopalan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orities, Banks etc. The accounting entries, it was contended by the assessee, also confirmed that there was a dissolution within the meaning of partnership law. The CIT (A) did not agree with the factual submissions that there was only a change in the constitution. In fact, the very first conclusion of his was that "as the appellant has claimed, there has been a dissolution of the firm on 31st Jan., 1975. All the attendant facts present in this case point only to this conclusion". However, he justified aggregation on the ground that any other interpretation would nullify the effect of s. 187(2). He distinguished the decisions of the Madras High Court in Mavukkarai (N) Estate Tea Factory 1978 CTR (Mad) 225 : (1978) 112 ITR 715 (Mad) and the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) 212 : (1977) 110 ITR 468 (AP). It was also pointed out that the decision in Vinayaka Cinema has been approved by the Madras High Court in Mavukkarai (N) Estate Tea Factory 1978 CTR (Mad) 225 : (1978) 112 ITR 715 (Mad). It was claimed that the distinction sought to be placed by the first appellate authority in respect of the earlier High Court decisions on this point, on the ground that the dissolution in the other cases were on account of the death of partner and not on account of a voluntary agreement for dissolution overlooks the principle that the dissolution brings about a succession as against change in constitution. The ld. Deptl. Rep. relied upon the arguments given on behalf of the authorities before the CIT (A) as well as the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rights. The accounts of the firm as between the partners have to be settled, subject to agreement by them, in accordance with the rules stated in section 48. The partners of a firm presumably are not co-owners of the property of the firm's or its assets". In view of the above passage it was contended that the continuance of the business assumed the continuance of the firm. It was also pointed out that s. 43 of the Partnership Act required notice by a partner and that there was no such notice prior to the dissolution and that it made the dissolution deed invalid in the eye of law. It was also contended that the case law, notwithstanding the decision in the case of Vinayaka Cinema justified aggregation allegedly on the basis of the decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on is always required because of the provision u/s 43. Sec. 43 refers to one of the modes of dissolution. In assessee's case there is dissolution by agreement specifically covered by s. 40 which lays down that firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners". We, therefore, find that there has been a dissolution on 31st Jan., 1975. 5. The only further question is therefore, whether notwithstanding the dissolution, the income for the period after 1st Feb., 1975 can be aggregated in the hands of the erstwhile firm merely on the ground that there are a number of same partners in the new firm as in the old firm. The first appellate authority relied upon the Full Bench decision of....