1987 (9) TMI 28

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....late Tribunal was justified in holding that the status of the petitioner firm is that of an unregistered firm and not that of an association of persons as claimed ?" The facts of the case giving rise to this reference may be summarised thus. The case relates to the assessment year 1976-77. The assessee was carrying on the business of film distribution and exploitation at jodhpur. The firm and all its partners were declared insolvent on November 17, 1971, by the Additional District judge No. 1, jodhpur, and a receiver was appointed on May 18, 1971. He continued the said business in respect of the pictures whose term did not expire. He filed the return relating to the said period in the status of an association of persons. The Income-tax O....

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....ssee and its partners were declared insolvent in the year 1971 and a receiver was appointed on May 18, 1971. It is not in dispute that on the adjudication of the firm as insolvent, it stood dissolved under section 41 (a), Partnership Act. Sub-section (1) of section 189 of the Act runs as under: " 189. (1) Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such ....

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....d the individual interest of the various owners of the business. If they had done so, there would have been chaos in the business. The profits to which those owners lay claim and which they were not averse to pocketing, were earned on behalf of an 'association of persons'. The profits were earned on behalf of the persons who had common interest created by the order of the court and were on that account an 'association of persons'. The existence of specific or defined interest in the profits did not make the earning any the less by an 'association of persons'. Liability to tax depends upon the earning of profits by a unit and not upon the ultimate division of the profits. The expression 'association of persons' is not defined in the Act. At ....