COMMISSIONER OF INCOME TAX Vs. KRISHNA RE ROLLING MILLS

JUDGEMENT

(1.) THIS reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue is to answer the following question of law, namely :

(2.) THE relevant assessment year is 1974-75 for which the previous year ended on March 31, 1974. THE assessee-firm, Sri Krishna Re-rolling Mills, Jaipur, comprised six partners and was constituted by a partnership deed dated November 25, 1965 (annexure "A"). One of the terms in the partnership deed was that the firm shall not be dissolved by the death or retirement or insolvency of any of the partners ; and on the death of any partner, the surviving partners will include the heir or legal representative of the deceased partner as a partner in that firm. Two of the partners of this firm, namely, Smt. Jai Devi and Munshi Lal Gupta, died on July 19, 1973, and July 27, 1973, respectively. THE surviving partners, namely, Shri-ram Gupta, Vidhyadhar Jaju, Mohanlal Gupta and Ghanshyam Das Mohta, continued that partnership taking in Smt. Barfidevi, widow of Munshi Lal Gupta, and Shriniwas Gupta, son of Smt. Jai Devi Gupta, as new partners in the firm. A new partnership deed dated November 2, 1973 (annexure "B"), was drawn up describing the four surviving partners as continuing partners and the widow and the son of the two deceased partners as new partners stating clearly in this deed that it was mutually agreed to continue the partnership taking into it these two new partners and reconstituting the firm with effect from July 28, 1973. Accordingly, there was an express indication in this new deed (annexure "B") of the continuance of the same firm by the surviving partners along with the widow and the son of the two deceased partners. This partnership deed also contained a similar term as in the earlier deed (annexure "A"), that the firm will not stand dissolved by the death or retirement or insolvency of any of the partners ; and that on the death of any partner, the surviving partners will include the heir of the deceased partner as a partner in the firm.

(3.) AS already indicated, there was a contract to the contrary in the partnership deed as a result of which the partnership firm did not stand dissolved in accordance with the general principle contained in Section 42(c) of the Indian Partnership Act on the death of two of the six partners. This is also evident from the fact that the surviving four partners continued the partnership together with heirs of the two deceased partners as new partners and said so expressly in the new partnership deed as stated earlier. In view of this fact, there appears to be no reason to hold that the earlier decision of this court on which learned counsel for the Revenue relied is distinguishable for any reason. In that decision, one of us (J. S. Verma C. J.), speaking for the Division Bench, concluded as under (p. 502) :