2000 PLP 2328 (PTD)
COMMISSIONER OF INCOME-TAX Versus AYYANARAPPAN & CO.
| Citation | 2000 PLP 2328 (PTD) |
| Forum / Court | 236 I T R 454 |
| Bench Members | K. A. Thanikkachalam and N. V. Balasubramanian, JJ |
| Parties | COMMISSIONER OF INCOME-TAX Versus AYYANARAPPAN & CO. |
| Primary Law | Income-tax |
Q1: What are the key laws and sections cited in 2000 PLP 2328 (PTD)?
This judgment primarily cites: Income-tax as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 2000 PLP 2328 (PTD)?
The case was heard and decided by the 236 I T R 454 bench comprising: K. A. Thanikkachalam and N. V. Balasubramanian, JJ.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 2000 PLP 2328 (PTD) (COMMISSIONER OF INCOME-TAX Versus AYYANARAPPAN & CO.). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Headnotes / Summary
Balancing charge
Death of partner and reconstitution of firm
Depreciation allowed to firm prior to its reconstitution cannot be taken into account while computing profits under S.41(2)
Indian Income Tax Act, 1961, S.
41. The assessee was a firm. One of the partners died on May 28, 1976, and immediately thereafter the firm was reconstituted. In the previous year ended March 31, 1978, the assessee had transferred five assets in favour of four partners and a stranger. In computing the profits under section 41(2) of the Income Tax Act, 1961, the Income-tax officer took into account the depreciation deducted in the assessment made on the firm prior to the reconstitution. On appeal, the Appellate Assistant Commissioner held that, in computing the profits under section 41(2) of the Act, only the deductions granted to the assessee-firm could be taken into account and not deductions granted to the dissolved firm. The Tribunal confirmed this order. On a reference:' Held, that the Tribunal was correct in holding that while computing the profits under section 41(2) of the Act, the depreciation allowed to the firm prior to the reconstitution on May 28, 1976, should not be taken into account. CIT v. Empire Estate (1996) 218 ITR 355 (SC) applied. C. V. Rajan for the Commissioner. Nemo for the Assessee.
Judgment & Decree
K. A. THANIKKACHALAM, J.
At the instance of the Revenue, the Tribunal referred the following question for the opinion of this Court; under section 256(1) of the Income Tax Act, 1961, hereinafter referred to as the "Act": "Whether, on the facts and in the circumstances of the case, while computing the profits under section 41(2) for the assessment year 1978-79 the depreciation allowed to the firm prior to the reconstitution on May 28, 1976, should also be taken into account?" The assessee is a firm. One of the partners died on May 28, 1976, and immediately thereafter the firm was reconstituted. In the previous year ended on March 31, 1978 the assessee had transferred five assets in favour of four partners and a stranger. In computing the profits under section 41(2) of the Act, the Income-tax Officer took into account the depreciation deducted in the assessment made on the firm prior to the reconstitution also, in the view that the death of the partner led only to a change in the constitution and there was no succession of one firm by another. On appeal, the Appellate Assistant Commissioner held that in computing the profits under section 41(2) of the Act only the deductions granted to the assessee-firm could be taken into account and not deductions granted to the dissolved firm. On further appeal also, the Tribunal confirmed the order of the Appellate Assistant Commissioner. After the death of a partner, the firm would get dissolved, unless there is a contract to the contrary. In CIT v. Empire Estate (1996) 218 ITR 355, the Supreme Court held that the firm was dissolved on the death of a partner and the surviving partners did not continue the business. While so, the depreciation granted in the hands of the erstwhile firm cannot be included under section 41(2) of the Act along-with the deduction granted to the newly constituted firm. Therefore, the Tribunal was correct in holding that while computing the profits under section 41(2) of the Act, the depreciation allowed to the firm prior to the reconstitution on May 28, 1976, should not be taken into account. Accordingly, we answer the question referred to us in the negative and against the Department. No costs. M.B.A./4137/FC Reference answered.