Dipak Kumar Sen, J.
1. M/s. Joshi & Co., the assessee, is a partnership firm. Till December 16, 1975, the partners of the assessee were Amritlal Parkhani, Prataprai Joshi, Dilip Joshi and Bhupendra Joshi. The partnership was constituted by a deed dated April 28, 1973, and contained, inter alia, the following clause :
' If any partner shall die during the partnership, then his heirs executors, administrators or representatives or any person or persons to whom he may by will bequeath the same shall be entitled to the share of such deceased partner in the capital, stock, property and effects of the partnership business and may either continue as a partner or partners inthe business in respect and to the extent of the share and interest of such deceased partner or may sell such share and interest in the same manner as are hereinbefore contained in Clause 17 concerning a sale by a retiring partner.'
2. Bhupendra Joshi, one of the partners of the assessee, died on December 16, 1975--15 days prior to the end of the accounting year of the assessee ending on December 31, 1975.
3. After the death of Bhupendra, it was agreed between the continuing partners and the heirs of Bhupendra that Jitendra Joshi, a son of Bhupendra, would be admitted as a partner in the firm. A new deed of partnership was drawn up and executed on January 7, 1976. It was recorded in the new deed that the continuing partners had been carrying on the said partnership business along with the new partner, Jitendra, with effect from December 17, 1975.
4. In the meantime, the assessee applied for fresh registration under Section 184(8) of the Income-tax Act, 1961, both in Form No. 11 and Form No. 11A on December 24, 1975. A letter was filed stating that the deed of the new partnership would be submitted at the earliest.
5. It is not in dispute that the deed which was executed on January 7, 1976, was filed on January 14, 1976. It is also not in dispute that prior to the death of Bhupendra, the assessee had been assessed as a registered firm up to the assessment year 1975-76.
6. In assessing the assessee to income-tax for the assessment year 1976-77, the Income-tax Officer found that the assessee had filed the forms on December 24, 1975, as aforesaid without enclosing copy of the new partnership deed. He found further that on the death of Bhupendra on December 16, 1975, there was a change in the constitution of the firm. The deed for the new partnership was drawn up subsequent to the accounting year ending on December 31, 1975, and that the said deed was also registered later. He held that as the new deed had been drawn up on January 7, 1976, after the close of the accounting year, no operative deed of partnership was in existence during and up to the end of the accounting year, i.e., up to December 31, 1975. As the partnership was not evidenced by any instrument in writing during and at the end of the accounting year, he held that the assessee should be held to be an unregistered firm. The assessment was made accordingly.
7. Being aggrieved, the assessee preferred an appeal against the decision of the Income-tax Officer to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also found that during the relevant accounting year, there was no partnership deed in existence and on the factsheld that the refusal of the Income-tax Officer to grant registration to the assessee was justified. The appeal was rejected.
8. The assessee went up in further appeal before the Income-tax Appellate Tribunal. It was contended before the Tribunal that it was not prescribed in the Income-tax Act, 1961, nor in the statutory forms that there should be a partnership deed in existence before the close of the accounting year in order to entitle a partnership firm to be registered under the Income-tax Act. It was contended that the only requirement of the statute was that the partnership should be evidenced by an instrument. In this case, the deed drawn up on January 7, 1976, evidenced the partnership. It was submitted that the assessee's application which was filed on December 24, 1975, not accompanied by the instrument, could only be held to be defective and the Income-tax Officer ought to have called upon the assessee to make good the defect under Section 185(2) of the Act. It was further contended that, in any event, the Income-tax Officer should have granted registration to the assessee up to December 16, 1975, as uptil that date, there was a registered firm in existence in terms of the earlier deed dated April 28, 1973. The assessee was entitled to renewal of registration till that date.
9. The Tribunal held that in the facts there was a change in the constitution of the assessee within the meaning of Section 187(2) of the Act as on the death of one of its partners, his legal heir had been admitted as a new partner and the three original partners continued. The Tribunal held further that in view of the said change in the constitution, the assessee had to apply for fresh registration in accordance with the provisions of the Act. In order to apply for fresh registration, the application for registration had to be evidenced by an instrument of partnership. There was no instrument to evidence this partnership during the accounting year and the instrument relied on by the assessee came into existence after the accounting period came to an end. Therefore, there was no instrument evidencing the partnership for the registration of which the application had been made by the assessee. It was also held that by reason of the change in the constitution of the partnership, the assessee was not entitled to an automatic renewal of registration on the basis of its previous registration.
10. The Tribunal also took into account the fact that the assessee had filed one consolidated return for the entire year and there was no claim for making two separate assessments. Therefore, following a decision of the Orissa High Court in the case of Jawaharlal Khandelwal : [1977]110ITR834(All) , it was held that the partnership had claimed to be treated as a registered firm till the end of the accounting year, there was no claim forcontinuation of registration only for a part of the relevant period and, assuch, the claim was not maintainable.
11. On an application of the assessee under Section 256(1) of the Income-tax Act, 1961, the following questions have been referred as questions of law arising out of the order of the Tribunal for the opinion of this court I
' (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that registration could not be allowed to the assessee-firm for the assessment year 1976-77 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the firm was not entitled to continuation of registration up to December 15, 1975, under Section 184(7) of the Income-tax Act, 1961 '
12. At the hearing, learned counsel for the assessee submitted before us that the Income-tax Act, 1961, had brought about a change in law so far as registration of partnership firms is concerned. He drew our attention to the relevant sections and rules under the Indian Income-tax Act, 1922, and those of the Income-tax Act, 1961, noted hereafter as follows :
'Indian Income-tax Act, 1922
Section 26A.--(1) Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax.
(2) The application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.
Indian Income-tax Rules, 1922
Rule 2.--Any firm constituted under an instrument of partnership specifying the individual shares of the partners may, under the provisions of Section 26A of the Indian Income-tax Act, 1922 (hereinafter in these rules referred to as the Act), register with the Income-tax Officer, the particulars contained in the said instrument on application made in this behalf.
Rule 4.--(1) If, on receipt of the application referred to in Rule 3, the Income-tax Officer is satisfied that there is or was a firm in existence constituted as shown in the instrument of partnership and that the application has been properly made, he shall enter in writing at the foot of the instrument or certified copy, as the case may be, a certificate in the following form, namely :--...
Rule 5.--The certificate of registration granted under Rule 4 shall have effect only for the assessment to be made for the year mentioned therein.
Rule 6.--Any firm to whom a certificate of registration has been granted under Rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. Such application shall be signed personally by all the partners (not being minors) of the firm, or, where the application is made after dissolution of the firm, by all persons (not being minors), who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased and accompanied by a certificate in the form set out below.....
Income-tax Act, 1961
Section 184.--(1) An application for registration of a firm for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm, if-
(i) the partnership is evidenced by an instrument; and
(ii) the individual shares of the partners are specified in that instrument.
(2) Such application may, subject to the provisions of this section, be made either during the existence of the firm or after its dissolution....
(4) The application shall be made before the end of the previous year for the assessment year in respect of which registration is sought :
Provided that the Income-tax Officer may entertain an application made after the end of the previous year, if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year. (5) The application shall be accompanied by the original instrument evidencing the partnership, together with a copy thereof :...
(6) The application shall be made in the prescribed form and shall contain the prescribed particulars.
(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year :
Provided that-
(i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted ; and
(ii) the firm furnishes, before the expity of the time allowed under Sub-section (1) or Sub-section (2) of Section 139 (whether fixed originally or onextension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made.
(8) Where any such change has taken place in the previous year, the firm shall apply for fresh registration for the assessment year concerned in accordance with the provisions of this section.
Section 185.--(1) On receipt of an application for the registration of the firm, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and-
(a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year ;
(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm...
(2) Where the Income-tax Officer considers that the application for registration is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation ; and if the defect is not rectified within that period, the Income-tax Officer shall, by order in writing, reject the application.
(3) Where the Income-tax Officer considers that the declaration furnished by a firm in pursuance of Sub-section (7) of Section 184 is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the declaration within a period of one month from the date of such intimation ; and if the defect is not rectified within that period, the Income-tax Officer shall, by order in writing, declare that the registration granted to the firm shall not have effect for the relevant assessment year,
Section 187.--(1) Where at the time of making an assessment under Section 143 or Section 144 it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment :
Provided that-
(i) the income of the previous year shall, for the purpose of inclusion in the total incomes of the partners, be apportioned between the partners who, in such previous year, were entitled to receive the same ; and
(ii) when the tax assessed upon a partner cannot be recovered fromhim, it shall be recovered from the firm as constituted at the time of making the assessment.
(2) For the purposes of this section, there is a change in the constitution of the firm-
(a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change; or
(b) where all the partners continue with a change in their respective shares or in the shares of some of them :
Provided that nothing contained in Clause (a) shall apply to a case where the firm is dissolved on the death of any of its partners. Section 188.--Where a firm carrying on a business or profession is succeeded by another firm, and the case is not covered by Section 187, separate assessments shall be made on the predecessor firm and the successor firm in accordance with the provisions of Section 170.
Income-tax Rules, 1962
Rule 22.--Application for registration of a firm.--(1) An application for registration of a firm for the purposes of the Act shall be made in accordance with the provisions of Sub-rules (2) to (5).
(2) Where the application is made before the end of the relevant previous year-
(i) and where no change in the constitution of the firm or the shares of the partners has taken place during the previous year before the date of the application-
(a) the application shall be made in Form No. 11 ; and
(b) it shall be accompanied by the original instrument evidencing the partnership at the date of the application together with a copy thereof. A certified copy of the instrument together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument cannot be produced ;
(ii) and where any change or changes in the constitution of the firm or the shares of the partners have taken place during the previous year before the date of the application-
(a) the application shall be made in Form No. 11A; and
(b) it shall be accompanied by the original instrument or instruments evidencing the partnership as in existence from time to time during the previous year up to the date of the application together with copies thereof.A certified copy of the instrument or instruments together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument or instruments cannot be produced.
(3) Where after the date of making an application under Sub-rule (2), any change or changes in the constitution of the firm or the shares of the partners have taken place during the previous year, a fresh application shall be made after each such change takes place in accordance with the provisions of Sub-clauses (a) and (b) of Clause (ii) of Sub-rule (2) and the time-limit prescribed in Sub-section (4) of Section 184 shall apply to each such application,
(4) Where the application is made after the end of the relevant previous year-
(i) and where no change in the constitution of the firm or the shares of the partners has taken place during the said previous year and up to the date of the application, the application shall be made in accordance with the provisions of sub-clauses (a) and (b) of Clause (i) of Sub-rule (2);
(ii) and where any change or changes in the constitution of the firm or the shares of the partners have taken place during the said previous year and/or after the end of the previous year but before the date of the application-
(a) the application shall be made in Form No. 11A ; and
(b) it shall be accompanied by the original instrument or instruments evidencing the partnership as in existence from time to time during the previous year and up to the date of the application together with copies thereof. A certified copy of the instrument or instruments together with a duplicate copy thereof may be attached to the application if, for sufficient reason, the original instrument or instruments cannot be produced.
Rule 23.--Intimation regarding subsequent changes in constitution, etc.--If after the date of the application, or of the last application where more than one application are made, for registration of a firm for any assessment year and before the assessment for that assessment year is completed by the Income-tax Officer, so far as known to the firm, any change or changes take place in the constitution of the firm or the shares of the partners, the details of such change or changes shall be communicated by the firm to the Income-tax Officer as soon as possible after each such change takes place.
Rule 24.--Declaration for continuation of registration.--The declaration to be furnished under Sub-section (7) of Section 184 shall be in Form No. 12 and shall be verified in the manner indicated therein and shall be signed by the persons concerned in accordance with Sub-rule (5) of Rule 22.
Rule 25.--Certificate of registration.--The certificate under subsection (4) of Section 185 shall be recorded on the last of the instruments evidencing the partnership during the relevant previous year (or on the certified copy submitted in lieu thereof) attached with the application for registration of the firm made in accordance with the sub-rules (2) to (4) of Rule 22.'
13. Construing the aforesaid statutory provisions, the learned advocate for the assessee submitted that unlike the earlier Act where the instrument itself had to be certified and registered by the Income-tax Officer, in the subsequent statute, the Income-tax Officer was only called upon to enquire into the genuineness of the firm and its constitution as evidenced by the instrument. The sections of the Act of 1961 and the rules framed thereunder as noted earlier clearly provided as follows :
(a) Any defect in the application had to be brought to the notice of the partnership firm so that the defect could be cured within a month.
(b) The failure to enclose a copy of the instrument of partnership was a curable defect as aforesaid.
(c) It was possible to apply for registration even after the end of the accounting year.
(d) All changes in the constitution and of the successive instruments up to and even after the date of the application had to be intimated for the consideration of the Income-tax Officer.
14. The learned advocate submitted that it was not mandatory nor was it laid down by the statute that the instrument of partnership must be contemporaneous or must be operative during the accounting year and that in the facts of the instant case, the Income-tax Officer ought to have granted registration to the assessee.
15. The learned advocate next submitted that under the proviso to Section 187(2) of the Income-tax Act, 1961, which laid down retrospectively with effect from April 1, 1975 that where a firm is dissolved on the death of any of its partners, it should not be held that there was a change in the constitution of the firm within the meaning of Section 187(2)(a). On the facts of this case, the assessee was entitled to continuation of its earlier registration up to the date of the death of the deceased partner and, in any event, under Section 188 of the Act, two separate assessments were called for. The income-tax authorities were not entitled to refuse registration to the assessee up to the date of the death of one of its partners.
16. The learned advocate next submitted that the fact that only one return for the entire accounting year had been filed was of no relevance to the question of registration. Relevant considerations for the purpose of registration of a firm were clearly stated in the statute and if the assessee fulfilledthe said conditions as laid down, the firm would be entitled to be registered and the Revenue authorities would not be entitled to refuseregistration.
17. The learned advocate for the Revenue contended to the contrary. He submitted that even assuming there was a change in law under the subsequent statute of 1961, the assessee still had to fulfil the conditions laid down in the statute as prevailing and the rules framed thereunder before it could claim to be treated as a registered firm. The learned advocate submitted that, in the instant case, the assessee was not entitled to be treated as a registered firm during the assessment year in question inasmuch as two major conditions had not been fulfilled by the assessee. The said conditions were, firstly, that in claiming fresh registration under Section 184(8), an operative deed of partnership should have been in existence on the basis of which the assessee could claim for fresh registration. Secondly, it was contended that the assessee was not entitled to the continuation of its earlier registration up to the death of the deceased partner inasmuch as no declaration in Form No. 12 had been filed by the assessee before the Income-tax Officer on the basis of which it could claim continuation of registration.
18. The learned advocate submitted that it has been laid down by the Supreme Court that the provisions for registration of a firm were benefits conferred on assessees by the Income-tax Act. Such provisions had to be construed strictly and the assessee had to come within the four corners of the statute and the rules framed thereunder before it could claim the benefit of registration.
19. In support of the respective contentions, the following cases were cited at the Bar which may be considered hereafter :
(a) CIT v. A. Abdul Rahim and Co. : [1965]55ITR651(SC) . This decision under the Indian Income-tax Act, 1922, was cited for the proposition laid down by the Supreme Court that if a partnership was a genuine and valid one, the Income-tax Officer has no power to reject its registration if the provisions of Section 26A of the said Act and the rules made thereunder were complied with. On the facts of this case, the Supreme Court held that the Income-tax Officer was not entitled to refuse registration on the ground that one of the partners was the benamidar of another.
(b) CIT v. Joseph and George : [1970]77ITR292(Ker) . In this case, the assessee, a firm of lawyers, applied for registration after the close of the accounting year with another application for condonation of the delay. The delay was condoned but the firm was not registered on the ground that the document of partnership embodying the terms of the partnership and the constitution of the firm was drawn up after the end of the accounting year.
On these facts, a Division Bench of the High Court of Kerala, following the decision of the Supreme Court in the case of R. C. Mitter & Sows v. CIT : [1959]36ITR194(SC) , held that in order to be entitled to be registered, a partnership had to be carried on in accordance with the terms of an instrument of partnership which was operative during the accounting year. The Supreme Court made an identical observation in construing the language of Section 26A of the 1922 Act which used the expression ' partnership constituted under a document '. The Kerala High Court noted that the Supreme Court had laid down the law in construing the rules framed under the old Act which had been embodied in the sections of the subsequent Act of 1961. The Supreme Court, however, did not lay down categorically whether such a document should be in existence at the very inception of the accounting year or before the year came to an end. The Kerala High Court held that it was sufficient that the document came into existence at any point of time during the accounting year, that is, any day on which the application could be lawfully made. It was held that to construe otherwise would empower the Income-tax Officer not only to -excuse the delay in presenting the application but also the delay in executing and drawing up the partnership document. This was not contemplated by the statute.
(c) Sant Lal Kashmiri Lal v. CIT : [1972]86ITR76(Delhi) . In this case, a partner of a firm registered under the Income-tax Act died during the accounting year ending on November 8, 1961. The remaining partners executed a fresh partnership deed before the end of the accounting year and took over the old business. It was agreed that the accounts of the firm should be closed at the end of the accounting year but the net profits for the entire year should be ascertained and calculated on time basis up to the date of death of the partner and adjusted accordingly. A declaration in Form No. 12 was signed by the surviving partners but the date of the dissolution was not filled in. Without giving any opportunity to the firm to rectify the defect, the Income-tax Officer held that the declaration was not correct as there was a change in the constitution of the firm and held that the firm could not be granted registration or continuation of registration in the assessment. On these facts, the Division Bench of the Delhi High Court held that as the genuineness of the assessee was not in doubt and the changes were brought to the notice of the Income-tax Officer, the Income-tax Officer should have given an opportunity to the assessee to rectify any defect in its application.
(d) Sandersons and Morgans v. ITO : [1977]108ITR954(Cal) . In this case, one of the partners of the assessee died during the assessment year concerned. The deed provided that the death of a partner would notdissolve the partnership as to the other partners. The other partners continued the business and during the relevant assessment year contended that by virtue of the firm's earlier registration, the firm was entitled to continuation of the registration thereof. It was held by a Division Bench of this court that the death of one of the partners resulted in a change in the constitution of the partnership even if there was no automatic dissolution and, therefore, it was held that consequently under Section 184(7) of the Income-tax Act, 1961, the assessee was not entitled to continuation of registration in the next assessment year.
(e) Jawaharlal Khandelwal v. CIT : [1977]110ITR884(Orissa) . In this case, a Division Bench of the Orissa High Court held that where one of the partners of a partnership firm had died during the relevant assessment year and where the firm did not close its books of account, no reconstitution of the firm was made, there was no application either in Form No. 11 or Form No. 11A and one single return was filed for the entire previous year, the Income-tax Officer was justified in refusing registration to the firm. The claim of the firm to be treated as a registered firm up to the death of the partner had no force in view of the fact that one single return had been filed for the entire year.
(f) Alankar Jewellers v. CIT : [1979]116ITR89(Patna) . In this case, the assessee, a partnership firm, applied for registration under Section 184(1) of the Income-tax Act, 1961, in the prescribed form. The application was otherwise in order but was not accompanied by the original deed of partnership or a certified copy thereof. The Income-tax Officer refused to grant registration to the firm on that ground without issuing any notice to the assessee under Section 185(2) of the Act to cure the defect. In revision, the Commissioner of Income-tax upheld the order of the Income-tax Officer. In an application under articles 226 and 227 of the Constitution of India, it was held by a Division Bench of the Patna High Court that the Income-tax Officer had erred in law in not issuing notice to the assessee under Section 185(2) of the Act to rectify the defects in the application. The impugned orders of the Revenue authorities were quashed and the Income-tax Officer was directed to consider the application of the assessee for registration afresh.
(g) CIT v. Mothooram Prem Chand . In this case, a Division Bench of the Punjab & Haryana High Court held that if the conditions as laid down in Sections 184 and 185 of the Income-tax Act, 1961, and Rules 22 to 25 of its Rules were complied with, the assessee concerned would be entitled to claim registration. It was not necessary to declare in Form No. 11 or 11A that the profits of the previous year had been divided between the partners and registration could not berefused on the ground that the profits of the firm had not, in fact, been so divided. It was held that Sections 184 and 185 had no connection with Section 139. There were provisions in the Act under which action could be taken against the assessee for non-compliance with Section 139 but registration could hot be refused on that ground.
(h) Brij Rattan Lal Bhoop Kishore v. CIT : [1982]136ITR722(All) . In this case, the Income-tax Officer had assessed the assessee-firm as a registered firm though, during the assessment, one of the partners informed the Income-tax Officer that he had not personally signed Form No. 12 for the relevant assessment year. The letter was not taken into account at the time of completion of the assessment. The Commissioner of Income-tax in exercise of his powers under Section 263 of the Act cancelled the registration on notice to the assessee. On appeal, the Income-tax Appellate Tribunal upheld the view of the Commissioner. On a reference, it was held by the Division Bench of the Allahabad High Court that even if an application for registration was not personally signed by the partners of of the firm, the Income-tax Officer should have given an opportunity to the firm to rectify the defect in the application and registration could not have been refused without giving such opportunity. The decision of the Patna High Court in Alankar Jewellers : [1979]116ITR89(Patna) was followed.
(i) CIT v. Commercial Finance Corporation : [1982]138ITR281(All) . In this case, a Division Bench of the Allahabad High Court had held that where the assessee, a partnership firm, had applied for registration with the original partnership deed and filed the agreement executed between the partners and minors admitted to the benefits of partnership later but before the application was disposed of, it was not open to the Income-tax Officer to reject the application on the ground that it was defective. The Income-tax Officer in any event had to give the assessee an opportunity to rectify any defect in the application. In this case, the defect had been rectified by the assessee itself and the application ceased to be defective after the agreement with the minors was filed. The Tribunal was justified on the facts in condoning the delay in making the application.
(j) D.S. Mahadevasa & Co. v. CIT : [1984]145ITR187(KAR) . This decision of the Karnataka High Court was cited for the proposition that the proviso to Section 184(4) of the Income-tax Act 1961, does not confer power on the Income-tax Officer to condone any delay in the execution of the partnership instrument. The proviso, it was held, only empowered the Income-tax Officer to condone the delay in filing the application for registration. The Tribunal also had no such power to condone the delay in the execution of the instrument of the partnership beyond the accounting period. On the facts, it was held that the assessee was not entitled toregistration. The Division Bench followed the decision of the Kerala HighCourt in Joseph & George : [1970]77ITR292(Ker) and the decision of theSupreme Court in R. C. Mitter 6- Sons : [1959]36ITR194(SC) .
(k) CIT v. Ganesh Fire Works Industries : [1984]147ITR781(Mad) . In this case, one of the partners of the assessee-firm, registered under the Income-tax, 1961, died during the accounting year. On the death of the partner, though the assessee-firm was dissolved, the partners did not close the accounts, but closed them at the end of the accounting year. No transactions were effected subsequent to the death of the partner, but the business was wound up and accounts were taken for dissolution as on the date of the death. The surviving partners and the legal representatives of the deceased partner filed a declaration in Form No. 12 for continuation of registration of the assessee for the said assessment year. The Income-tax Officer refused to grant registration on the ground that the continuation had been asked for the entire accounting year, though one of the partners had died daring the year. The refusal of the Income-tax Officer to grant registration was upheld by the Appellate Assistant Commissioner. But, on further appeal, the Tribunal held that the registration of the firm should have been granted till the date of the death. On a reference, it was held by the Madras High Court that there was no change in the constitution of the partnership till the death of the partner and the assessee was entitled to registration under Section 184(7) of the Act till such date. The only defect in the application was that the registration was claimed till the end of the year. It was held that the procedure contemplated under Section 185(3) of the Act was mandatory and the application had to be returned for rectification of the defect and if this procedure was followed, the assessee could have filed a proper declaration. The order of the Tribunal was upheld.
(l) Rambilas Chandram v. CIT . In this case, the Rajasthan High Court, following the decision of this court in Sanderson & Morgans : [1973]87ITR270(Cal) , held that a firm was not dissolved on the death of a partner as there was an agreement that the death of a partner could not automatically dissolve the partnership if the surviving partners agreed to take the legal representative of the deceased partner in the place of the deceased in the business. The business of the firm continued uninterrupted and the accounts of the assessee were not closed. There was merely a change in the constitution of the firm within the meaning of Section 187(2) of the Act and only one assessment could be made on the firm for the said assessment year.
(m) CIT v. Jasumal Devandas : [1985]156ITR551(MP) . In this case, it was held by a Division Bench of the Madhya Pradesh High Courtthat after the insertion of the proviso to Section 187(2) of the Income-tax Act, 1961, by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1975, a firm would stand automatically dissolved on the death or retirement of any of its partners and the new firm constituted thereafter would be a new and a successor-firm and two separate assessments would be required to be made, one for the period up to the date of death of the partner and the other for the successor-firm.
20. The following decisions of the Supreme Court were also cited for the proposition that rules framed under a statute also had a statutory force and were required to be taken into account in construing the statute or to ascertain the intention of the Legislature ?
(i) CIT(Agrl.) v. Shri Keshab Chandra Mandal : [1950]18ITR569(SC) .
(ii) Karimtharum Tea Estates Ltd. v. State of Kerala : [1963]48ITR83(SC) ; and
(iii) Tata Engineering & Locomotive Co. Ltd. v. Gram Panchayat : [1977]1SCR306 .
21. It is to be examined first whether, on the facts and circumstances of the instant case, the assessee-firm was dissolved on the death of Bhupendra, one of its partners. Factually, it does not appear that the assessee-firm was dissolved. Under Clause (21) of the partnership deed, one of the heirs of the deceased partner was inducted as a partner in the firm in respect and to the extent of the share and interest of the deceased partner. The new deed dated January 7, 1976, records the same. We are unable to read the proviso to Section 187(2) of the Income-tax Act, 1961, to mean that in every case where one of the partners dies, the firm is and must be held to be dissolved for the purpose of registration under the Income-tax Act. The language of the proviso is clear and it says that nothing in Clause (a) of Section 187(2) of the Act shall apply to a case where a firm is dissolved on the death of any of its partners. The proviso does not provide for automatic dissolution. With respect, we are unable to accept the view taken by the Madhya Pradesh High Court in Jasumal Devandas : [1985]156ITR551(MP) .
22. In that view of the matter, it has to be held on the facts of the case that on the date of death, there has been a change in the constitution of the assessee-firm.
23. Next to be examined is whether the assessee is entitled to fresh registration for the assessment year on the strength of its application made in Forms Nos. 11 and 11A and on the strength of the new deed of partnership executed after the end of the accounting year. On a construction ofthe relevant sections and the rules framed under the new Act, it appears to us that under the new Act, all that an assessee firm is required to submit is an instrument as documentary evidence of the partnership. It is not stated in the Act that evidence must be contemporaneous nor is it laid down that the instrument of partnership must be executed within the accounting year. On the other hand, it has been left open to the Income-tax Officer to accept an application after the end of the accounting year and a duty is cast on the assessee to submit to the Income-tax Officer all subsequent instruments, if any, which may be in existence, right up to the date of the application showing the changes in the constitution of the firm. Under Rule 23, all changes in the constitution, even after the date of the application, are required to be intimated to the Income-tax Officer. The duty cast on the Income-tax Officer under the Act of 1961 is to ascertain the genuineness of the firm and its constitution as specified in the instrument. The Income-tax Officer may entertain an application made even after the end of the accounting year if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of such period.
24. In commercial practice, the terms of a partnership constituted initially under an oral agreement are often subsequently recorded in writing in an instrument. This is not prohibited in law. The instrument shows that the partnership had come into existence from a date other than that of the execution of the instrument and also the terms and conditions on which the partnership had been and is being carried on. With respect, we are unable to read and apply the decision of the Supreme Court in the case of R. C. Mitter & Sons : [1959]36ITR194(SC) , in the manner it has been done by the Kerala and Karnataka High Courts. The Indian Income-tax Act, 1922, required that the Income-tax Officer certify and register the deed itself and the registration of the firm would follow. This is not so under the Income-tax Act of 1961.
25. If it is held that the execution of the deed must be made within the accounting year, we have to read in the statute, words which are not there. A partner of a firm may die, as in the instant case, on the verge of the end of an accounting year and there may not be enough time for the surviving partners to execute a deed within the accounting year: The surviving partners may continue the firm with or without a new partner but the firm will lose the benefit of registration for the entire period.
26. For the reason as aforesaid, we answer question No. 1 in the negative and in favour of the assessee. In view of our answer to question No. 1, question No. 2 need not be answered.
27. There will be no order as to costs.
28. The learned advocate for the Revenue has orally prayed that a certificate be granted that this is a fit case for appeal to the Supreme Court. Inasmuch as we have taken a view different from that taken by the other High Courts and as it appears that a substantial question of law arises from this judgment, we allow the prayer of the Revenue and certify that this is a fit case for appeal to the Supreme Court under Section 261 of the Income-tax Act.
29. Let the order granting the certificate be drawn up separately.
Mukul Gopal Mukherjt, J.
30. I agree.