WAZID ALI ABID ALI, ETC. versus COMMISSIONER OF INCOME TAX, LUCKNOW, ETC.

Citation: [1988] 1 S.C.R. 917 · Decided: 10-11-1987 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Case Partly allowed

Judgment (excerpt)

, 
W AZID ALI ABID ALI, ETC. 
v. 
COMMISSIONER OF INCOME TAX, LUCKNOW, ETC. 
NOVEMBER 10, 1987 
A -
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.] 
B 
Income Tax Acr, 1961-Effect of death of one of the partners of a 
registered firm during the assessment year on the continued benefit of 
registration under section 184(7) thereof-Whether a fresh application 
for registration with partnership deed embodying change in constitution 
of firm, required. 
Two appeals were filed before this Court one (Civil Appeal 
No. 1792 (NT) of 1974) by the assessee from the Allahabad High Court, 
c 
and the second (Civil Appeal No. 609 (NT) of 1975) by certificate, at the 
instance of the revenue, from the Gujarat High Court. Both the appeals 
dealt with a common situation, namely, the position of the registered 
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firm during the assessment year if one of the partners died or retired. 
In. the assessee's case above-mentioned, the assessee was a part-
nership firm styled as Messrs. Wazid Ali Abid Ali, constituted under a 
deed of partnershlp, which, inter alia provided "that where the deed is 
silent, it shall be governed by the Indian Fartnership Act save and 
E 
except that on the death or demise of any partner the firm shall not be 
dissolved but shall be carried on with the remaining partners and that 
heir and representative of the deceased partner who resides in India on 
such terms and conditions to which they mutually agree." 
On June 4, 1964, one of the partners, Qamaruddin, died and his 
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son, Fariduddin, joined the firm as a partner. New deed of partnership 
evidencing the change in the constitution of the firm was not executed 
(before November 4, 1964). The assessee filed a declaration in Form No. 
XII for the relevant assessment year 1965-66 under section 184(7) of the 
Act, signed by all the partners and Fariduddin taken in as a partner in 
place of his father, Qamaruddin. The Income Tax Officer held that the 
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admission of a new partner in place of the deceased partners amounted 
to a change in the constitution of the firm and as the firm had failed to 
file a fresh application for registration, the assessee was not entitled to 
the continued benefit of registration under section 184(7) of the Act. An 
appeal filed by the assessee before the Appellate Assistant Commis-
sioner was dismissed. The assessee preferred an appeal to the Income 
H 
917 
918 
SUPREME COURT REPORTS 
[1988) l S.C.R. 
Tax Appellate Tribunal. The Tribunal held that the death of Qamarud-
A 
din and the inclusion of Fariduddin involved a change in the constitu-
tion of the firm and a fresh deed of partnership should have been 
executed and a fresh application for registration, filed. The Tribunal, 
however, also held that the conditions laid down in sub-section (7) of 
section 184 of the Act had been satisfied and the assessee would be 
B 
c 
entitled to the benefit of registration upto June 4, 1964; that is, a part 
of the previous year, and that the Income Tax Officer should have made 
a single assessment only on the assessee and apportioned the total in-
come between the partners who were entitled to receive the profits 
accordingly as they were entitled to share the profits, the firm being 
assessed as a registered firm in respect of the profits for the remaining 
part of the previous year. And the question "whether, on the facts and 
in the circumstances of the case, the Tribunal was justified in holding 
that for the period covered by the old constitution the income was 
assessable in the hands of the assessee as a registered firm?" was refer-
red to the High Court, which answered the question in favour of the 
revenue and in the negative. The assessee appealed to this court for 
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relief, as aforementioned. 
In the second appeal afore-mentioned at the instance of the re-
venue, the assessee, a registered firm, consisted of five partners, out of 
whom, one partner, Sarabhai Chimanlal died on March 9, 1963. The 
assessee firm filed two returns for the assessment year in question-<me 
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for the period ending on March 9, 1963, and the other, for the rest of 
the accounting period. A declaration under section 184(2) of the Act 
was enclosed along with the return for the first period. The two returns 
were filed on the basis that according to the assessee there was a dissolu-
tion of the firm on the death of the partner Sarabhai Chimanlal, and, 
therefore, the subsequent continuance of business was only for the purpose 
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of winding up the firm. The 

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