THE COMMISSIONER OF INCOME TAX CENTRAL-I, BOMBAY versus MESSRS EMPIRE ESTATE, BOMBAY

Citation: [1996] 1 S.C.R. 1004 · Decided: 29-01-1996 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Dismissed

Judgment (excerpt)

A 
THE COMMISSIONER OF INCOME TAX CENTRAL-I, BOMBAY 
v. 
MESSRS EMPIRE ESTATE, BOMBAY 
JANUARY 29, 1996 
B 
[J.S. VERMA, S.P. BHARUCHA AND SUJATA V. MANOHAR, JJ.] 
Income Tax Act, 1961-Sections 187(2) and 188-Assessments-
Partnership firm-Partnership deed did not provide that death of a partner 
' 
would not dissolve the partnershi~Death of a partner-Dissolution of 
C 
partnershi~W/ien surviving partners continue business under fresh partner-
D 
ship deed-Section 188 attracted-Section 187(2) held not applicable. 
The asses see, a partnership firm had three partners. One of partners 
died on 12.1.1974 and there being no provision in the deed of partnership 
contemplating the continuance of the partnership in the event of the death 
~fa partner, the partnership stood dissolved. No deed of dissolution was 
ei~cuted but the surviving partners executed a fresh deed of partnership 
• 
for carrying on the business on and from 13.1.1974 where it was mentioned 
that the earlier partnership had stood dissolved on 12.1.1974. The assessee 
filed two returns of income for the relevant previous year, one for the 
E period 1.6.1973 to 12.1.1974 and the other for the period 13.1.1974 to 
30.6.1974, submitting that the earlier partnership had stood dissolved on 
the death of one of its partners and, therefore, this was a case of succession 
contemplated by Section 188 of the Income Tax Act and not a case of 
reconstitution of the partnership within the meaning of section 187. The 
F 
Income Tax Officer rejected the assessee's case. The appeal to the Com-
missioner of Income Tax (Appeals) failed. In appeal to the Income Tax 
Appellate Tribunal, there being a conflict in the decision of the High 
Courts, the Tribunal referred to this court the question as to whether on 
the facts and in the circumstances of the case and in law, the Tribunal was 
G justified in holding that there should be two assessments as the assessees' 
case did not fall within the provisions of section 187 (2) of the Act. 
Answering the question in the affirmative while dismissing the ap-
peal, this Court 
H 
HELD : 1.1. The deed of partnership between the partner who died 
1004 
C.l.T. v. EMPIREESTATE(BHARUCHA,J.) 
1005 
and the partners who survived, did not provide that the death of a partner A 
would not dissolve the partnership Therefore, by reason of Section 42 of 
the Partnership Act, the partnership stood dissolved on 12.1.1974, by 
reason of death of one of the partners. The case was not one of a change 
in the constitution of the partnership. It fall outside the scope of section 
187 of Income Tax Act as that provision would apply to the case of a 
B 
partnership where a partner died and the partnership deed provided that 
death would not result in the dissolution of the partnership. When the 
surviving partners in such a case continued the business in partnership, 
Section 188 was attracted for there was a succession of one by an another 
partnership. [1008-B; 1009-F-H; 1008-G) 
Wazid Ali Abid Ali v. CIT, Lucknow, 169 I.T.R. 761 SC, relied on. 
C.I. T. v. Basant Behari Gopal Behari & Co., 172 I.T.R. 662 and C./. T. 
v. lndralok Picture Palace, 188 I.T.R. 730, distinguished. 
CIVIL ORIGINAL JURISDICTION : Tax Reference Case Nos. 
13-14 of 1983. 
(Under Section 257 of the Income Tax Act, 1961.) 
c 
D 
Dr. R.R. Mishra, Ranbir Chandra and S.N. Terdol for the Appellant. E 
The Judgment of the Court was delivered by 
BHARUCHA, J. There being a conflict in the decisions of the High 
Courts, the Income Tax Appellate Tribunal has referred to this Court, F 
under Section 257 of the Income Tax Act, 1961, the following question : 
"Whether on the facts and in the circumstances of the case and in 
law, the Tribunal was justified in holding that there should be two 
assessments, one for the period from 1.6.1973 to 12.1.1974 and the 
other for the period from 13.1.1974 to 30.6.1974, as the assessee's G 
case did not fall within the provisions of Section 187(2) of the 
Income Tax Act, 1961." 
The relevant assessment year is A.Y. 1975-76. The relevant account-
ing year ended on 30th June, 1974. 
H 
1006 
SUPREME COURT REPORTS 
[1996] 1 S.C.R. 
A 
The assessee is a partnership firm. It was constituted under a deed 
of partnership dated 18th July, 1968. Its three partners were Mrs. Ellen 
Keki Modi, Mr. Rustom Keki Modi and Ms. Maneck Keki Modi. Mrs. 
Ellen Modi died on 12th January, 1974. There being no provision in the 
deed of partnership contemplating the continuance o

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