Law: Income Tax Act, 1922

Section: 170

Income-tax-----Succession---Firm---Firm converted into company---Amounts to succession of business of firm by company---Firm assessable for the period till it was succeeded by company---Indian Income Tax Act, 1961, S.170. The assessee-firm comprised three partners during the accounting period, which was the calendar year 1972. A new deed of partnership was constituted with effect from August 3, 1972, whereby four new partners were admitted into the partnership increasing the number of partners from three to seven. On October 16, 1972, a deed of copartnery was entered into by the seven partners and the partnership firm was converted into a company, which was incorporated under the Companies Act, 1956, with effect from November 25, 1972. Whereas the firm filed a return showing nil income for the entire accounting period relevant to the assessment year 1973-74, the company filed the return for the period January 1, 1972 to March 31, 1973. The company filed an application for change in the accounting period and that was how the return was filed up to March 31, 1973. The assessee-firm contended before the Assessing Officer that the entire income for the accounting period was liable to be taxed in the hands of the company and not in its hands. The Assessing Officer, rejecting the contention of the assessee, held that the business of the firm was succeeded to by the company and, therefore, the income for the period from January 1, 1972 to November 24, 1972, was liable to be taxed in the hands of the firm and for the subsequent period the income was liable to be taxed in the hands of the company. The Appellate Authority as well as the Tribunal affirmed, the view of the Assessing Authority so far as the- question whether the business of the firm was succeeded by the company was concerned and held that the business of the firm was succeeded by the company within the meaning of section 170 of the Income Tax Act, 1961. The Tribunal, however, held that the income up to October 16, 1972, only was assessable in the hands of the firm. On a reference at the instance of the assessee: Held, that where a firm is converted into a company then the business of the firm is succeeded…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492