1984 (10) TMI 17

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....riods and the tax charged on such aggregate income ? " The assessee was a partnership consisting of eleven partners. It was constituted under a deed of partnership executed on February 6, 1962. Out of the eleven partners, one partner, K. Subbarao died on September 3, 1971. For the income-tax assessment year 1972-73, the assessee filed two income-tax returns, one for the period January 1, 1971, to September, 3, 1971, relating to the partnership firm of eleven partners and another for the period September 4, 1971, to December 31, 1971, relating to the partnership firm which came into existence after the death of K. Subbarao. It may be mentioned that after the death of Subbarao, a partnership deed was executed on September 29, 1971, between....

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....were taken over by the newly constituted firm and the business was thenceforth carried on as a going concern. The Appellate Assistant Commissioner rejected the assessee's contention that there was a dissolution on September 3, 1971, when the partner, Subbarao, died. He accordingly upheld the assessment made by the Income-tax Officer. The assessee went in second appeal to the Appellate Tribunal. The Tribunal accepted the assessee's contention that on the death of Subbarao, there was a dissolution of the partnership evidenced by the deed executed on February 6, 1962, and, therefore, a separate assessment should be made on the firm as was in existence till September 3, 1971. The Tribunal held that it was not merely a change in the constitution....

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....ership with the legal heirs of the deceased partner is amply borne out by clause 4 admitting the legal heirs of the deceased partner as partners. The second aspect to which he invites our attention is clause 14 of the partnership deed which is in the following terms: " 14. The period of this partnership is not specified. However, the partners may continue this partnership as long as they desire and if they decide to discontinue this firm, this deed will be in operation till the transactions relating to this firm are completed, thereafter it is settled that we shall all manage the same." Learned counsel submits that the real effect of clause 14 is that the partners shall continue the partnership without cessation and this intention is ....

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....ted to already would support the Revenue's plea that there was an agreement between the partners under the deed of partnership dated February 6, 1962, not to dissolve the partnership on the death of any of the partners. Learned counsel states that the Tribunal failed to consider the impact of the subsequent conduct in arriving at the conclusion that there was a dissolution of the partnership within the terms of section 42(c) of the Indian Partnership Act. In the first place, we are unable to subscribe to the view that the admission of the legal heirs of a deceased partner would by itself establish a conduct to justify the inference that there was an agreement to the effect that the partnership shall not be dissolved on the death of a par....

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.... death of the partner on September 3, 1971, and the profits up to the date of death ascertained at Rs. 1,03,972. The newly constituted partnership opened separate accounts on September 4, 1971, and closed its accounts on December 31, 1971, and for this period, the profit was Rs. 52,000. The opening of accounts separately for the two periods, the ascertainment of the profits separately for two periods and the division of the profits among the respective partners under the two deeds of partnership referred to above is also conduct relevant for the purpose. In our opinion, the above acts on the part of the first-mentioned partnership firm as well as the second-mentioned partnership firm would point to the conduct that the parties intended to t....