TaxTMI 
TaxTMI 
1983 (10) TMI 71
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.... The assessee firm filed two separate returns, one for the period upto to 5th July, 1974 and the second for the period 6th July, 1974 onwards. The ITO's composite assessment was made on an order under s. 263. Cl. 10 of the old partnership deed originally in Gujarati and translated in English was as follows: "No new partners can be admitted in the partnership firm except with the mutual consent of all the partners. However, if any partner dies or becomes incapable, then in his place his heirs shall be taken up as partner." 3. The ITO has relied upon this cl. 10 for his view that the firm does not get dissolved on account of the death of Smt. Ichhalaxmi P. Desai, It continues. it only thus becomes as case of change in constitution of the ....
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....as also relied up on the decision of the Gujarat High Court in the case of CIT vs. M/s. Mohandsas & Mohanlal, Godhra in IT Ref. No. 95 of 1974 dt. 9th Dec. 1975. In that case the partnership deed provided as follows: "In the case of death of a partners, as far as possible, the heir of the deceased shall be taken in the partnership and if that be not possible, then there should be a separation (retirement) by settling the share of the deceased". The high Court interpreted this clause to mean that the partnership was to continue after the death of one of the partners. According to the ld. Departmental Represenative cl. 10 of the old partnership of the assessee quoted above is in material terms the same as the aforesaid clause in the case ....
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....ofits credited to the respective partner's accounts as on the date of death of one of the partners. The assessee firm was doing the business of executing contracts with Railways. The High Court relied upon the fact that no new contract was entered into or undertaken after the death of the partner and the main business activity seemed to have been given up completely. The High Court held that there should be separate assessment upto the date of death of that partner. The assessee's counsel had also relied upon substantially the same circumstances as hose mentioned by the CIT (A) to urge that the firm must be considered to have been dissolved. 7. The issues before us are whether in the first place consider that cl. 10 in the old partnersh....
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.... of the partner. the Partnership Act itself provides that death of partner would result in dissolution but that can be avoided by an agreement between the partners. The novelty and the ratio of the said decision in Harjivandas Hathibhai's case therefore, is that this agreement to vary the effect of the statue can be inferred from the circumstances subsequent to the death of the partner, i.e., when that partner is no longer living to participate in that common agreement. We have a case where there is an agreement continuing the firm and the question is whether that agreement could be vary by events of the same type which also occurred after the death of the partner in the case of Harjivandss Hathibhai. This is a simpler case because the ques....