COMMISSIONER OF INCOME TAX vs. KETAN CHEMICALS

ITR/276/1994HC GujaratGJHC24020352199423 November 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI8 pages
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What were the facts?

The assessee is a partnership firm, Ketan Chemicals, for the assessment year 1981-82. The firm was constituted on 12/2/1978 with 14 partners and followed the Samvat Year accounting period. On 26/8/1980, 5 partners retired, and the remaining 9 partners executed a new partnership deed on 27/8/1980 with 6 new partners. This new deed stipulated that the accounting period would be the financial year, commencing from 27/8/1980 to 31/3/1981. The Assessing Officer invoked Section 187(2) of the Income Tax Act, 1961, holding it was a change in constitution and not a dissolution, thus rejecting the assessee's request for two separate assessments. The Assessing Officer framed a single assessment for the period 22/10/1979 to 31/3/1981. The assessee appealed, and the Commissioner (Appeals) directed two separate assessments.

What did the High Court hold?

The High Court held that the Tribunal's decision was not infirm. The Tribunal had accepted as a matter of fact that the new partnership deed executed on 27/8/1980 did not mention the old partnership, the books of accounts were closed on 26/10/1980 with a balance sheet drawn up on that date, and there was a change in the accounting period from Samvat Year to the financial year, which was accepted by the Assessing Officer. The Court found that nothing had been brought on record to dislodge these findings of fact. It was apparent that a new contract was entered into on 27/8/1980 incorporating fresh terms, including the change in accounting period, and this was accepted by the Assessing Officer. The revenue had not pointed out any evidence from the record that the new contract had any relevance with the old partnership. Therefore, in light of the findings of fact recorded by the Tribunal, there was no infirmity in the Tribunal's decision. The question was answered in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that there should be two separate assessments in the case of the assessee, turning on the interpretation of Section 187(2) of the Income Tax Act, 1961. Assessee's contentions: The assessee relied on the impugned order of the Tribunal. The Tribunal, in its order, accepted as a matter of fact that the new partnership deed executed on 27/8/1980 did not mention the old partnership, the books of accounts were closed on 26/10/1980 with a balance sheet drawn up on that date, and there was a change in the accounting period from Samvat Year to the financial year, which was accepted by the Assessing Officer. The assessee also relied on the Gujarat High Court decision in Additional C.I.T., Gujarat v. Harjivandas Hathibhai, [1977] 108 ITR 517. Revenue's contentions: The revenue contended that this was not a case of dissolution of the partnership and therefore, the provisions of Section 188 of the Act could not be applied. The revenue invited attention to the provisions of Section 187(2) of the Act and the decision in Commissioner of Income Tax v. Amritlal Nihalchand, [1992] 196 ITR 345.

Which sections of the Income-tax Act were involved?

Section 187(2),Section 188,Section 256(2)

AI-generated summary — verify with the full judgment below

ITR/276/1994 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 276 of 1994 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== COMMISSIONER OF INCOME TAX - Applicant(s)

Versus KETAN CHEMICALS - Respondent(s) ============================================================== Appearance : MR MANISH R BHATT for Applicant(s) : 1, MR SN SOPARKAR for Respondent(s) : 1, ================================================================== CORAM :  HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 23/11/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1.The Income Tax App

The order continues below.

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