COMMISSIONER OF INCOME TAX KERALA-II; ERNAKULAM versus M/S. KANDATH MOTORS ETC .

Citation: [1997] 2 S.C.R. 675 · Decided: 04-03-1997 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed
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Judgment (excerpt)

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COMMISSIONER OF INCOME TAX KERALA-II; ERNAKULAM 
A 
v. 
M/S. KANDATH MOTORS ETC . 
... 
MARCH 4, 1997 
[B.P. JEEVAN REDDY AND SUHAS C. SEN, JJ.) 
B 
Income Tax Act, 1961 : Sec. 186(1Hartnership Jinn-Registration 
of-Death of .a partner-New Partnership Deed signed by one partner 
twice,--:lndividual and representative capacity-Income Tax Officer cancelled 
registration-On appeal:-Tribunal held that partnership was genuine-On ref- c 
erence, High Court affinned the views of Tribunal:-Held, no legal bar to a 
person joining as a nominee of the deceased partner-No reason to doubt the 
validity of partnership agreement-Partnership. 
The assessee was a registered partnership firm under the Income 
D 
Tax Act, 1961. The partnership Deed was constituted by six partners. On 
the death of one of the partners, a fresh partnership deed was executed. 
One 'K' signed the partnership deed twice, in his individual capacity and 
also in representative capacity. The Income Tax Officer in exercise of his 
powers under s.186(1) of the Income Tax Act cancelled the registration on 
the ground that no genuine partnership firm was in existence. The Appel· E 
late Assistant Commissioner upheld the views of the Income Tax Officer. 
On appeal the Tribunal held that partnership firm was genuine and the 
Income Tax Officer was in error in cancelling the registration of the firm. 
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On reference the High Court affirmed the views of the Tribunal. Hence 
this appeal by the revenue. 
F 
Dismissing the appeal, this Court 
HELD : 1 There can be no legal bar to a personal representation of 
the deceased partner being admitted to the partnership by the surviving 
' 
partners. If the personal representation of the deceased is also one of the 
surviving partners, he can agree to join the new partnership as a nominee G 
of the legal heirs of the deceased partner. [679-D] 
2. There is no reason to doubt the validity of the partnership agree· 
ment as there were four other partners and 'K' was holding a power of 
attorney on behalf of the other legal heirs. There is nothing in the partner- H 
675 
676 
SUPREME COURT REPORTS 
[1997] 2 S.C.R. 
A ship Act or the Contract Act which prevents an agreement of this nature 
being entered into by the six partners. It is not possible to hold that 'K' 
would do anything in the partnership which would be in bis interest and 
against the interest of the other legal heirs. [683-G-H] 
Lachman Das v. Commissioner of Income Tax, (1948) 16 ITR 35 (PC) 
B and Chandrakant Manila/ Shah and Another v. Commissioner of Income 
Tax, (1992) 193 ITR 1, relied on. 
Messrs. Hoosen Kasam Dada, (a Jinn) v. Commissioner of Income 
Tax, Bengal, 5 ITR 182 and Rai Bahadur Lokenath Prasad Dhandhania v. 
C Commissioner of Income Tax, Bihar and Orissa, 8 ITR 369, distinguished. 
Commissioner of Income Tax v.Adbul Rahim, 55 ITR 651; Commis-
sioner of Income Tax v. Bagvalakshmi & Co., 55 ITR 660; Agarwal and Co. 
v. Commissioner of Income Tax, U.P., 77 ITR 10; Commissioner of Income 
Tax v. Kalu Babu Lal Chand, 37 ITR 23 (SC) and Commissioner of Income 
D. Tax, Bombay City II v. Raghavi Anandji & Co., 100 ITR 246, referred to. 
E 
F 
"Lindley and Banks on Partnership", 16th Edition; Halsbury's Law of 
England, 4th Edn., Vol. 9 Contract, Article 204 and Mayne's Hindu Law 
(9th Edn), Page 398, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3069 of 
1980 Etc. 
From the Judgment and order dated 24.5.79 of the Kerala High 
Court in I.T.R. No. 85 of 1979. 
G.C. Sharma, T.L.V. Iyer, Joseph Vellapally, B.S. Ahuja, S.N. Terdol, 
P. Parmeswaran, S. Balakrishnan, S. Prasad, (S. Ganesh and Mrs. A.K. 
Verma) for J.B.D. & Co., Sameer Parekh, E.R. Kumar, R. Deepamala, 
P.H. Parekh, U.V. Eradi, A.P. Mcdh, K.V. Mohan, Aruneshwar Gupta 
G Mukul Mudgal, Dhruv Mehta, S.K. Mehta for the appearing parties. 
The Judgment of the Court was delivered by 
SEN, J. This case relates to assessment year 1972-73 for which the 
relevant previous year was the year commencing on 1.7.1970 and ending 
H on 30.6.1971. 
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C.I.T. v. KANDATH MOTORS [SEN, J.] 
677 
Initially, the assessee firm was constituted by a Partnership Deed A 
dated 13.9.1966 and consisted of six persons : 
' 
1. K.K. Sudevan 
2. K.S. Krishnadas 
3. K.A. Jayapalan 
4. K.S. Haridas 
5. K.A. Mohandas 
6. K.A. Haridas 
The partnership had been granted registration under the Income Tax 
Act. Clause 13 of that Partnership Deed provided that the death or 
retirement of any one of the partners sha
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