Madhya Pradesh High Court
Commissioner Of Income-Tax vs Sharad Vijaya Saw Mills on 31 August, 1989
Equivalent citations: [1990]181ITR266(MP)
JUDGMENT
G.G. Sohani, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Jabalpur Bench, has referred the following question of law to this court for its opinion.
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, in the case of the assessee, there was a succession within the meaning of Section 188 and not a change in the constitution of the firm under Section 187(2) ?"
2. The material facts giving rise to this reference briefly are as follows : The assessee is assessed in the status of a registered firm. For the assessment year 1978-79, for which the accounting year ended on Diwali 1977, the assessee filed two returns ; one for the period from Diwali 1976, to March 18, 1977, and another for the period from March 19, 1977, to Diwali 1977. The assessee contended that, on March 18, 1977, the assessee-firm was dissolved and another firm was constituted on March 19, 1977. The Income-tax Officer, however, held that as some of the partners of the firm which was dissolved continued to be the partners in the new firm, it was a case of a change in the constitution of the firm. The Income-tax Officer, accordingly, made one assessment. On appeal, the order passed by the Income-tax Officer was upheld by the Commissioner of Income-tax (Appeals). On further appeal before the Tribunal, the Tribunal held that in view of the judgment of this court in Jalam Chand Mangilal (No. 2) v. CIT [ 1982] 138 ITR 343, Section 187(2) of the Act was attracted and that there should have been two assessments for the two periods involved as it was a case of succession of one firm by another firm as provided by Section 188 of the Act. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.
3. In Jalam Chand Mangilal's case [1982] 138 ITR 343, a Division Bench of this court, following the decision of this court in Ganesh Dal Mills v. CIT [1982] 136 ITR 762, had held that where there was a dissolution of a firm and constitution of a new firm thereafter, it was a case of succession of one firm by another firm as provided by Section 188 of the Act. This decision was overruled by a Full Bench of this court in Girdharilal Nannelal v. CIT [1984] 147 ITR 529. Referring to that decision, the Supreme Court observed in Wazid Ali Abid Ali v. CIT [1988] 169 ITR 761, as follows (at page 778) :
"The Full Bench of the Madhya Pradesh High Court in Girdarilal Nannelal v. CIT [1984] 147 ITR 529, held that any matter for which a provision was made in the Income-tax Act, 1961, was to be governed by it, notwithstanding anything different or to the contrary contained in the general law relating to that matter. It was further held that in the case of a change in the constitution of a firm during the accounting year, the income earned by the firm before such change was to be clubbed with the income earned after such change and a single assessment had to be made on the firm for the entire accounting period. On an analysis of the different sections of the Act, we are unable to agree with this conclusion."
4. The decision of the Division Bench of this court in Ganesh Dal Mills v. CIT [1982] 136 ITR 762, was approved by the Supreme Court. Under the circumstances, learned counsel for the Revenue fairly conceded that the reference has to be answered in the affirmative and against the Revenue.
5. Our answer to the question referred to this court is, therefore, in the affirmative and against the Revenue. In the circumstances of the case, parties shall bear their own costs.