The ITO Ward-2(3), Baroda V. Smt Jibaba T Board, Baroda

ITA 3400/AHD/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0165 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-07-2009
• Assessment Year: 1990-1991
• Appeal Filed On: 01-11-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: J P SHAH
• Keywords: Capital asset; Business income; Capital receipt; Liquidation
• Section: 208; 148; 63; 28; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGARWAL, A.M.) I.T.A. NOS. 3399, 3400, 3401, 3402 & 3406/AHD./2002 ASSESSMENT YEAR : 1990-1991 INCOME TAX OFFICER, WARD-2(3), BARODA -VS.- SHRI JALAMSINH B. BARAD, SHRI JIBABA T. BARAD, SHRI GAMBHIRSINH B. BARAD, SHRI GHANSHAYAMSINH B. BARAD, PRABHAT CONSTRUCTION CO, BARODA (APPELLANT) (RESPONDENT) & C.O. NOS. 221 TO 225/AHD./2003 (ARISING OUT OF I.T.A. NOS. 3399 TO 3402 & 3406/ AHD/2002) ASSESSMENT YEAR : 1990-1991 SHRI JALAMSINH B. BARAD, -VS.- INCOME TAX OFFICER, WARD-2(3), BARODA SHRI JIBABA T. BARAD, SHRI GAMBHIRSINH B. BARAD, GHANSHYMSINH B. BARAD, PRABHAT CONSTRUCTION CO, BARODA, BARODA (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI J.P. SHAH DEPARTMENT BY : SHRI M.C. PAN DIT O R D E R PER BENCH :- ALL THE APPEALS BY THE REVENUE AND CROSS OBJECTION S BY THE ASSESSEE ARE AGAINST THE COMMON ORDER DATED 14.08.2002 OF LEARNED COMMIS SIONER OF INCOME TAX (APPEALS)-II, BARODA FOR THE ASSESSMENT YEAR 1990-91. 2. THE REVENUE IN ITS APPEALS HAS RAISED THE FOLLOW ING COMMON GROUNDS EXCEPT VARIATION IN ADDITION, WHICH READ AS UNDER :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III, BARODA HAS ERRED HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TAXING THE A MOUNT OF AWARD IN THE HANDS OF THE ASSESSEE CONSIDERING THE SAME AS INCO ME AND DELETING THE ADDITION OF RS.7,56,625/- (ITA 3399/AHD./2002); RS. 4,01,662/- (IN ITA NO. 3400/AHD./2002); RS.7,75,213/- (IN ITA NO. 3401/AHD ./2002); RS.7,56,750/- 2 (IN ITA NO. 3402/AHD./2002) AND RS.43,42,030/- (IN ITA NO.3406/AHD./2002). (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE U PHELD THE ORDER OF THE ASSESSING OFFICER. 3. THE ASSESSEE IN ITS CROSS OBJECTIONS HAS RAISED THE FOLLOWING COMMON GROUNDS :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN THE LAW, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, BAR ODA WAS RIGHT IN REJECTING THE ORDER OF A.O. AND TREATING THE AWARD MONEY AS CAPITAL RECEIPT AND DELETE THE SAME AS INCOME, IN VIEW OF THE PRINC IPLES LAID DOWN IN THE CASE OF M/S. BANYAN AND BERRY REPORTED IN 222 ITR 831 (G UJARAT H.C.) (2) THE RESPONDENT PRAYS HON'BLE TRIBUNAL TO CONFIR M THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, BARODA. 4. IN ALL THESE APPEALS AND CROSS OBJECTIONS, COMMO N ISSUES ARE INVOLVED AND HENCE THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. 5. THE FIRST FOUR ASSESSEES BEING SHRI JAMALSINH B. BARAD, SHRI JIBABA T. BARAD, SHRI GAMBHIRSINH B. BARAD AND SHRI GHANSHYAMSINH B. BAR AD WERE THE PARTNERS OF THE FIRM, NAMELY M/S. PRABHAT CONSTRUCTION CO., WHICH CAME INTO EXIS TENCE BY VIRTUE OF A PARTNERSHIP DEED DATED 01.07.1981. THE FIRM HAD SIX PARTNERS AND THE BUSIN ESS OF THE FIRM WAS THAT OF CONSTRUCTION. THIS FIRM WAS DISSOLVED ON 30.11.1988. AT THAT TIME IT W AS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF DAMS FOR GOVERNMENT OF GUJARAT. THE FIRM HAD SOME O UTSTANDING CLAIMS AGAINST THE GOVERNMENT OF GUJARAT, WHICH WERE REFERRED TO AN ARBITRATOR. IN THE DISSOLUTION DEED, A PROVISION WAS MADE THAT THE PARTNERS WILL CONTINUE TO PURSUE THE PROCE EDINGS BEFORE THE ARBITRATOR. AFTER THE DISSOLUTION OF THE FIRM, THE BUSINESS WAS SOLD TO A GOING CONCERN, NAMELY M/S. RUPAL CONSTRUCTION PVT. LTD. IN WHICH ERSTWHILE PARTNERS HAD BECOME SHAREHOLDERS. HOWEVER THE PARTNERS OF THE FIRM RETAINED THE RIGHT TO PURSUE T HE PROCEEDINGS BEFORE THE ARBITRATOR. M/S. RUPAL CONSTRUCTION PVT. LTD. TOOK OVER ALL THE ASSETS AND LIABILITIES EXCEPT THE CLAIMS AND COUNTER- CLAIMS, SUITS, DEMANDS, WHICH WERE NOT ACCEPTED BY THE CLIENTS/ OTHER PARTIES/ GOVERNMENT. IN THIS REGARD, RELEVANT TERMS OF THE DISSOLUTION DEED READ AS UNDER :- '(5) THE PARTIES HERETO FURTHER AGREE THAT ALL SUMS OF MONEY WHICH MAY HEREAFTER BECOME DUE TO THE PARTNERSHIP IN RESPECT OF CLAIMS, DEMANDS, SUITS MADE AGAINST THE STATE GOVERNMENT IN RESPECT OF VARIOUS CONTRACT JOB S UNDERTAKEN BY THE PARTNERSHIP UPTO THE DATE OF TRANSFER OF ITS BUSINESS ON SAFE O F AFORESAID, INCLUDING THOSE 3 PENDING BEFORE VARIOUS FORUMS LIKE ARBITRATORS, OR AS MAY BE RECEIVED ULTIMATELY BY THE FINAL COURTS THAT IS TO SAY ALL MONEYS AS MAY B ECOME DUE AND RECEIVABLE IN FUTURE, EITHER AS DAMAGES, INTEREST OR OTHERWISE AG AINST ANY ACTION PENDING BEFORE JUDICIAL AND QUASI-JUDICIAL AUTHORITIES FOR ANY WOR K WHATSOEVER DONE BY THE PARTNERSHIP AND FOR DEMANDS FOR REFUND, OF SALES TA X, INCOME TAX AND ANY OTHER DUES SHALL BE APPORTIONED IN RESPECTIVE PROFIT-SHARING P ROPORTIONS AMONGST THE PARTIES HERETO, AS DISTRIBUTION OF CAPITAL ASSET AND CAPITA L RIGHTS UPON THE DISSOLUTION OF THIS PARTNERSHIP, PROVIDED THAT:- (A) NOTWITHSTANDING THE FACT THAT THE CLAIMS MADE A RE RECEIVED OR NOT, ALL INCIDENTAL EXPENSES INCLUDING THE LEGAL CHARGES, IN PURSUING T HE ACTIONS PENDING BEFORE THE COURTS AND/OR QUASI-JUDICIAL AUTHORITIES SHALL BE B ORNE BY AND CONTRIBUTED BY AS AND WHEN INCURRED BY THE PARTIES HERETO IN THEIR RE SPECTIVE PROPORTIONS. (B) IN THE EVENT THE SAID JUDICIAL OR QUASI-JUDICIA L AUTHORITIES REJECT THE CLAIMS MADE AND ORDER ANY DAMAGES OR SUMS PAYABLE BY THE PARTNE RSHIP, SUCH DAMAGES AND SUMS SHALL FORTHWITH BE PAID BY THE PARTIES HERETO IN THEIR RESPECTIVE PROFIT-SHARING PROPORTIONS.' 6. M/S. RUPAL CONSTRUCTION PVT. LTD. WAS INCORPORAT ED ON 21.11.1988. IT CONTINUED TO CARRY THE SAID CONSTRUCTION BUSINESS AFTER TAKING OVER IT FROM THE FIRM. AFTER TWO YEARS OF THE DISSOLUTION OF THE FIRM, THE ARBITRATOR PASSED AN A WARD FOR A SUM OF RS.43,42,025/-. THE DATE OF ORDER OF THE ARBITRATOR IS 20.04.1989 FALLING IN TH E FINANCIAL YEAR 1989-90 RELEVANT TO THE ASSESSMENT YEAR 1990-91. EACH PARTNER RECEIVED THE AMOUNT PROPORTIONATE TO HIS PARTNERSHIP SHARE. TO BE SPECIFIC, EACH PARTNER RECEIVED THE FO LLOWING AMOUNTS:- 1. PRABHATSINH BARAD - RS.7,56,750/- 2. GAMBHIRSINGH BARAD - RS.7,75,213/- 3. TALAMSINH BARAD - RS.7,56,625/- 4. GHANSHYAMSINH BARAD - RS.7,56,750/- 5. TORAVARSINH BARAD - RS.7,56,625/- 6. SMT. TIVIBEN TAPUBHAI - RS.4,01,662/- INITIALLY THE DEPARTMENT SOUGHT TO TAX THE FIRM M/S . PRABHAT CONSTRUCTION CO., RAJKOT IN RESPECT OF THE SUM OF RS.43,42,025/- BY INVOKING THE PROVIS IONS OF SECTION 176(3A) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) VIDE HI S ORDER DATED 31.12.1996 IN THAT CASE DISMISSED THE APPEAL OF THE ASSESSEE FIRM. THE RAJK OT BENCH OF THE TRIBUNAL IN ITA NO. 1905/AHD./1997 AND ITA NO. 357/AHD./1997 BEING CROS S APPEALS OF THE ASSESSEE AS WELL AS BY THE DEPARTMENT, HELD THAT THE JUDGMENT OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF BANYAN AND BERRY VS.- CIT (1996) 222 ITR 831 (GUJ.) IS SQ UARELY APPLICABLE AND ACCORDINGLY DIRECTED THE A.O. NOT TO TAX THE AMOUNT OF ARBITRATION AWARD IN THE HANDS OF THE ASSESSEE-FIRM. 4 7. THEREAFTER THE A.O. OF FOUR PARTNERS NAMELY SHRI JAMALSINH B. BARAD, SHRI JIBABA T. BARAD, SHRI GAMBHIRSINH B. BARAD AND SHRI GHANSHYA MSINH B. BARAD SOUGHT TO TAX THE RESPECTIVE SHARES IN THEIR INDIVIDUAL HANDS. IN THE ASSESSMENT ORDER, THE A.O. REFERRED TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN BANYA N AND BERRYS CASE (SUPRA) AND RELYING ON SOME OBSERVATIONS IN THAT CASE THAT AMOUNT IS TAXAB LE UNDER SECTION 176(3A) OF THE INCOME TAX ACT IN THE HANDS OF THE PARTNER, ISSUED NOTICE UNDE R SECTION 148 AND PASSED AN EX-PARTE ASSESSMENT ORDERS UNDER SECTION 144 TAXING THE RESP ECTIVE SHARES IN THEIR HANDS INVOKING SECTION 176(3A). THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) IN GHANSHYAMSINH B. BARADS CASE HELD THAT THE RECEIPT IN THE HANDS OF THE PAR TNERS IS CAPITAL IN NATURE AND ACCORDINGLY EXEMPT. IN THIS REGARD, WE REFER TO THE FINDING OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), AS UNDER AND WHICH HAVE BEEN FOLLOWED BY HIM IN OTHER THREE CASES :- 3.8. I HAVE CONSIDERED THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE APPELLANT AND ALSO PERUSED DIE CASE LAWS RELIED UPO N BY HIM. THE AO WHILE TAXING THE AWARD AMOUNT HAS INVOKED THE PROVISIONS OF SECT ION 176(3)(A). THE HON'BLE ITAT AHMEDEBAD VIDE ORDER DATED 6.8.2001, HAS DELET ED THE AMOUNT BROUGHT TO TAX IN THE HANDS OF FIRM M/S PRABHAT CONSTRUCTION CO. T HE AO HAS NOW TAXED THE AMOUNT OF ARBITRATION AWARD IN THE HANDS OF PARTNER THE CONTENTION OF THE APPELLANT THAT THERE WAS NO BUSINESS ACTIVITY BEING CARRIED O UT BY THE APPELLANT AND HENCE THE RECEIPT CANNOT BE TERMED AS BUSINESS INCOME. THIS C ONTENTION IS WELL SUPPORTED BY THE DECISIONS OF HON'BLE MADRAS HIGH COURT IN CASE OF P V GAJAPATHI RAJU VS CIT (1989) 176 ITR 238, KERELA HIGH COURT IN THE CASE O F S P V BANK VS CIT (1980) 126 ITR 773 AND IN THE CASE OF CIT VS KAR VALVES LT D (1987) 168 ITR 416 (KER). THE HON'BLE GUJARAT HIGH COURT HAS ALSO TAKEN THE S AME VIEW IN THE CASE OF BANYAN AND BERRY 222 ITR 831 WHICH HAS BEEN FOLLOWE D BY THE HON'BLE ITAT VIDE ORDER DATED 6.8.2001 WHILE DELETING THE ADDITION MA DE IN CASE OF M/S PRABHAT CONSTRUCTION CO (FIRM). IT HAS ALREADY BEEN HELD BY THE HON'BLE ITAT AHMEDABAD IN THE CASE OF FIRM THAT PROVISIONS OF SECTION 176( 3)(A) RWS 189(1) ARE NOT APPLICABLE.THE AO HAS NOT, BROUGHT ON RECORD ANY EV IDENCE THAT THE APPELLANT HAS RUN THE BUSINESS, THE PURPOSE OF WHICH WAS TO EARN PROFIT. IN THE CASE OF APPELLANT., THE ONLY PARTNERS HAVE DONE THE ACT OF REALISING TH E OUTSTANDING AMOUNT WHICH CAN, NOT BE TERMED AS 'BUSINESS' AS HELD IN THE ABOVE DE CISIONS. I FULLY AGREE WITH THE CONTENTION OF THE APPELLANT THAT IN THE ABSENCE OF 'BUSINESS' ACT IVITIES, THE AMOUNT OF AWARD CANNOT BE TAXED IN THE HANDS OF APPELLANT. THERE WA S NOT EVEN A SUGGESTION THAT APART FROM REALIZATION OF THE SUM IN QUESTION AFTER THE BUSINESS OF THE FIRM WAS TAKEN OVER BY THE COMPANY, THERE WAS ANY INCLINATIO N OR ACT ON THE PART OF ERSTWHILE PARTNERS INCLUDING THE APPELLANT SUGGESTING THAT TH E BUSINESS OF THE FIRM HAD NOT ACTUALLY CEASED OR THEY EVER INTENDED TO CARRY ON B USINESS OF THE FIRM CLANDESTINELY OR IN ANY OTHER MANNER. IT WAS CLEARLY AN ACT BY TH E PARTNERS IN THE ORDINARY COURSE OF HUMAN CONDUCT ONCE THEY DECIDED NOT TO CARRY ON ANY BUSINESS IN THEIR JOINT ENTITY AS A FIRM. THE HON'BLE GUJARAT HIGH COURT IN CASE OF BANYAN AND BERRY (SUPRA) ON PAGE 855 ( 222 ITR ) HAS HELD HAS UNDER : 5 ' NOTICING THE SCHEME OF THE PROVISIONS OF THE PART NERSHIP ACT RELATING TO DISSOLUTION MAKES IT APPARENT THAT THERE IS NOTHING ABNORMAL OR CONTRIVANCE OR A THING LIKE DEVICE WHERE THERE IS A TIME LAG BETWEEN THE DATE OF DISSOLUTION OF THE FIRM AND WINDING UP OF T HE AFFAIRS OF THE FIRM AS THEY REMAIN OUTSTANDING ON THE DATE OF DISSOLUTION. ON THE CONTRARY SUCH A STATE OF AFFAIRS IS ENVISAGED NORMALLY TO COME IN TO EXISTENCE AS A RESULT OF DISSOLUTION OF FIRM. IT MAKES OUT CLEARLY THAT D ISTINCTION BETWEEN DISSOLUTION OF THE FIRM RESULTING IN CESSATION OF I TS EXISTENCE AND THE CONTINUING AUTHORITY OF ERSTWHILE PARTNERS, NOT AS A FIRM BUT AS PERSONS IN CHARGE TO WIND UP THE AFFAIRS OF FIRM, TO BIND EACH OTHER BY THEIR ACT IN THE MATTER OF PENDING ACTIONS, REALIZATION OF ASSET S ETC. MERELY BECAUSE SOMETHING HAS REMAINED TO BE REALIZED ON ACCOUNT OF THE FIRM ON THE DATE WHEN DIE FIRM IS SOUGHT TO BE DISSOLVED BY CONSENT OF ALL THE PARTNERS, IT CANNOT BE SAID THAT THE ONLY PURPOSE FOR WHICH THE FIRM IS DISSOLVED IS TO GET RID OF THE EFFECT OF SUCH REALIZATION WHICH IS OUTSTANDING ON THE DATE OF DISSOLUTION. SUCH REALIZATION BY ALL THE PARTNERS O R ONE ACTING ON BEHALF OF THE PARTNERS FOR THE BENEFIT OF ALL THE PARTNERS TO BE SHARES, OR DEALT WITH IN ACCORDANCE WITH THE PROFIT SHARING RATIO OF THE PARTNERS DURING ITS EXISTENCE IS IN FACT THE LEGAL EFFECT OF A LAWFUL, VALID AND BONA FIDE DISSOLUTION. EVEN IF NO SUCH AGREEMENT OF TREATING A PENDING CLAIM AS AN ACTIONABLE CLAIM AND DIVIDING IT IN THE PROFIT SHAR ING RATIO ON HAVING A CLAIM HAD BEEN MADE PART OF THE DISSOLUTION DEED IN QUESTION, THE SAME RESULT WOULD HAVE FLOWN FROM THE PROVISIONS OF SECT ION 47 OF THE ACT. AS WE HAVE NOTICED DIE REMAINDER OF THE FIRM'S PROPERT Y IS TO BE DISBURSED BETWEEN THE PARTNERS IN THEIR PROFIT SHARING RATIO, THE AUTHORITY OF THE PARTNERS TO DO ALL ACTS NECESSARY AND THEIR STATUS OF AGENCY OF ALL FOR ONE AND ONE FOR ALL ALL CONTINUE TO EXIST FOR THE PURPO SE OF WINDING UP OF THE AFFAIRS OF THE FIRM WHICH REMAINS OUTSTANDING AS ON THE DATE EXISTING, CONTINUE TO EXIST UNTIL THE WINDING UP IS COMPLETE. IT CANNOT BE SAID THAT SOMETHING WHICH IS NOT OTHERWISE ENVISAGED IN LAW W AS SO PLOTTED AS A SCHEME OR DEVICE BY DIE PARTNERS FOR SOME PURPOSE O THER THAN TO BRING ABOUT THE LEGITIMATE CONSEQUENCE OF A DISSOLUTION'. F 3.9. HON'BLE HIGH COURT AT PAGE 861 HAS FURTHER OB SERVED AS UNDER :- 'SECTION 47 ENVISAGED THAT AFTER DISSOLUTION OF THE FIRM, THE AUTHORITY OF THE PARTNERS CONTINUE. FOR APPLICATION OF SECTION 47, D ISSOLUTION OF THE FIRM IS AN ACCEPTED PREMISE. ON THE ACCEPTANCE OF THAT PREMISE THE NECESSARY CONSEQUENCE IS THAT THE PARTNERS IN THEIR CAPACITY AS FIRM WHEN THEY DECIDED TO DISSOLVE THE FIRM STOP DOING BUSINESS IN THE FIR M. ALL THE ASSETS WHICH BELONG TO THE FIRM ON THE DATE OF DISSOLUTION CEASE TO HAVE A CHARACTER OF BUSINESS OR COMMERCIAL ASSETS. THEY ASSUME THE CHAR ACTER OF CAPITAL LIABLE TO BE APPLIED FOR PAYMENT OF DEBTS AND DISTRIBUTED AMONGST THE PARTNERS IN ACCORDANCE WITH THE TERMS OF AGREEMENT TO DISSOLVE READ WITH THE RELEVANT PROVISIONS OF THE INDIAN PARTNERSHIP ACT. REALISATI ON OF AMOUNT OF AWARD HAVING MADE IN FAVOUR OF THE CLAIMANT CANNOT, IN TH E CIRCUMSTANCES BE SAID TO BE A REALIZATION THROUGH CARRYING ON BUSINESS BY THE FIRM.' 6 3.10 THE INFERENCE DRAWN BY THE HOITBIE HIGH COURT ON PAGE 882 IS AS UNDER :- '...EVEN ASSUMING THAT THE RECEIPT OF THE AMOUNTS P URSUANT TO THE AWARD BY THE PARTNERS WAS A RECEIPT OF A DISCONTINUED BUSINE SS IT CANNOT BE TAXED IN THE HANDS OF THE FIRM UNDER SUB-SECTION (3A) BECAUS E THE FIRM HAVING STOOD DISSOLVED WHEN THE AMOUNT WAS AWARDED IT COULD NOT HAVE RECEIVED THE SUM AS A FIRM. IT COULD HAVE BEEN RECEIVED ONLY BY THE PARTNERS OF THE FIRM AND HAS IN FACT BEEN SO RECEIVED. WE MAY ALSO NOTICE HERE THAT BUT FOR THE PROVISIONS OF SUB-SECTION (3A) OF SECTION 176 ANY RECEIPT AS A RESULT OF REALIZING ANY ASSET OF THE FIRM BY THE PARTNERS WOULD HAVE BEEN A CAPITAL RECEIPT IN THEIR HANDS AND NOT TAXABLE.' 3.11 THE HON'BLE COURT WHILE DEALING WITH THE PROVI SIONS OF SECTION 60 AND 63 HAS OBSERVED AS UNDER :- ' WHEN A FIRM IS DISSOLVED AND CEASED TO EXIST, IT CEASES TO HOLD ANY INCOME PRODUCING ASSET, BUT ALL ITS ASSETS INCLUDING ACTIO NABLE CLAIMS, PARTAKES OF THE CHARACTER OF CAPITAL LIABLE TO BE DISBURSED AMONGST ITS PARTNERS ALTER DISCHARGING THE DEBTS. THEREFORE, IN THE FIRST INST ANCE NO QUESTION OF TRANSFER OF INCOME ARISES. RECEIPT UNDER THE AWARD BY THE PA RTNERS AFTER DISSOLUTION OF THE FIRM WOULD ORDINARY BE CAPITAL RECEIPTS IN THEI R HANDS WHEN RECEIVED, BUT FOR THE LEGAL FICTION CREATED UNDER SECTION 176(3A) IT IS APPARENT THAT UNDER SECTION 176(3A) SUCH RECEIPTS BECOME INCOME ONLY WH EN THEY ARE RECEIVED BY THE RECIPIENT AND ARE NOT TREATED AS INCOME AT EARL IER POINT OF TIME. THEREAFTER, WHEN THE FIRM STOOD DISSOLVED, IT DID N OT HAVE ANY INCOME WHICH IT COULD TRANSFER. WHEN THE PARTNERS RECEIVED, IT W AS NOT AS A RESULT OF THE TRANSFER OF INCOME, BUT AS A DISBURSEMENT OF ASSETS ON DISSOLUTION OF THE FIRM. THUS, IN FACT IT WAS A TRANSFER OF THE ASSET OF THE FIRM ITSELF TO WHICH SECTION 60 READ WITH SECTION 63 HAVE NO APPLICATION.' 3.12. THE HON'BLE ITAT, DELHI IN THE RECENT DECISI ON IN CASE OF CLT VS C. LYALL & CO (2001) 252 1TR 398, 117 TAXMAN 65 HAS AL SO HELD THAT WHERE ASSESSEE-FIRM CLAIMED THAT PARTNERSHIP HAD BEEN DIS SOLVED ON 24.1.1968 ANDTHAT AMOUNT RECEIVED SUBSEQUENTLY BY WAY OF ARBI TRATION AWARD BY SUB- PARTNERSHIP WAS CAPITAL IN NATURE AND EXEMPT UNDER SECTION 176(4). 3.13. CONSIDERING THE FACTS AND CIRCUMSTANCES OF T HE CASE AND FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION OF HON'B IE GUJARAT HIGH COURT IN THE CASE OF BANYAN AND BERRY (SUPRA) 1 HOLD THAT TH E AO WAS NOT JUSTIFIED IN TAXING THE AMOUNT OF AWARD HI THE HANDS OF APPELLAN T CONSIDERING THE SAME AS INCOME'. THE ADDITION MADE OF RS 7,56,750 IS THE REFORE, DIRECTED TO BE DELETED. 8. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT PROVISIONS OF SECTION 176(3A) ARE SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE AND THE HON'BLE GUJARAT HIGH 7 COURT IN BANYAN AND BERRYS CASE OBSERVED THAT THE SUM IS TAXABLE IN THE HANDS OF THE RECIPIENT. HE REFERRED TO VARIOUS PARAS FROM THAT JUDGMENT, WH EREIN THE HON'BLE GUJARAT HIGH COURT HAD OBSERVED THAT SUCH SUM WOULD BE TAXABLE IN THE HAND S OF THE RECIPIENT. VARIOUS PARAS OF THE ORDER OF HON'BLE GUJARAT HIGH COURT TO WHICH THE LD. D.R. HAS DRAWN OUR ATTENTION ARE AS UNDER :- (I) (PAGE 881)--------- FOR THE PURPOSE OF SECTION 176(3A) DISCONTINUANCE OF BUSINESS MUST BE THAT DISCONTINUANCE OF BUSINESS B Y THE PERSON CARRYING IT ON AS HAS BEEN STATED IN SUB-SECTION (4) OF SECTION 176 REGARDING DISCONT INUATION OR CESSATION OF PROFESSION. THE CASE, THEREFORE, MUST BE GOVERNED BY SUBSECTION (3A) OF S ECTION 176 FOR THE PURPOSE OF TREATING THE RECEIPT OF THE SUM UNDER THE AWARD AS AN INCOME OF THE ASSESSEE. SECTION 176(3A) CLEARLY POSTULATES THAT IN THE CASE OF DISCONTINUANCE OF BU SINESS IF ANY SUM IS RECEIVED THEREAFTER AND IF IT WOULD HAVE BEEN CONSIDERED AS INCOME OF THE PER SON HAD IT BEEN RECEIVED BY THE PERSON CARRYING ON THE BUSINESS BEFORE ITS DISCONTINUANCE , SUCH SUM IS TO BE TAXED AS INCOME IN THE HANDS OF THE PERSON WHO RECEIVES IT. IT IS NOT IN DISPUTE THAT FOR THE PURPOSE OF INCOME-TAX THE FIRM AND PARTNERS ARE TWO DISTINCT ENTITIES, THE PE RSON WHO CARRIED ON THE BUSINESS, WHICH WAS DISCONTINUED, WAS THE FIRM AND THE PERSONS WHO HAD RECEIVED THE SUM UNDER THE AWARD ARE THE PARTNERS.-------- (II) ------- (PAGE 881882)----- --- THEREFORE, ASSUMING THAT THE DISSOLUTION OF FIR M AMOUNTED TO DISCONTINUANCE OF BUSINESS BY THE FIRM AND RECEIPTS ARE COVERED BY SECTION 176(3A), THE FIRM HAVING CEASED TO EXIST ON ITS DISSOLUTION CANNOT BE TAXED WITH THE AID OF SECTION 189(1). THE ONLY PERSONS WHO COULD BE ASSESSED IN RESPECT OF THE RECEIPTS WERE THE PARTNERS WHO HAD ACTUALLY RECEIVED IT. THIS IS ALSO STRENGTHENED FR OM THE FACT THAT SUB-SECTIONS (3A) AND (4) FORM PART OF SUBSTANTIVE PROVISION WHILE SUB-SECTIONS ( 1), (2) AND (3) ARE MACHINERY PROVISIONS IN THE CASE OF BUSINESS WHICH HAS BEEN DISCONTINUED. SUB-S ECTION (3A) AND SUB-SECTION (4) DEAL WITH THE RECEIPTS OF BUSINESS OR PROFESSION WHICH HAS C EASED TO EXIST AND ARE RECEIVED AFTER SUCH CESSATION EITHER BY THE PERSON, WHO WAS REALLY CAR RYING ON THE BUSINESS, OR SUCCESSOR IN INTEREST WHO RECEIVES. BOTH SUB-SECTIONS (3A) AND (4) PROVID E FOR TAXING RECIPIENTS OF THE SUMS PROVIDED THE SAME WOULD BE A TAXABLE INCOME IN THE HANDS OF THE PERSON WHO MAY BE DIFFERENT FROM THE PERSON RECEIVING IT, HAD IT BEEN RECEIVED BEFORE D ISCONTINUANCE OF THE BUSINESS OR PROFESSION. THEREFORE, EVEN ASSUMING THAT THE RECEIPT OF THE AM OUNTS PURSUANT TO THE AWARD BY THE PARTNERS WAS A RECEIPT OF A DISCONTINUED BUSINESS IT CANNOT BE TAXED IN THE HANDS OF THE FIRM UNDER SUB- SECTION (3A) BECAUSE THE FIRM HAVING STOOD DISSOLV ED WHEN THE AMOUNT WAS AWARDED IT COULD NOT HAVE RECEIVED THE SUM AS A FIRM. IT COULD HAVE BEE N RECEIVED ONLY BY THE PARTNERS OF THE FIRM AND HAS IN FACT BEEN SO RECEIVED. ------------- (III) ----(HEAD NOTES)------- UNDER SECTION 189 OF THE INCOME-TAX ACT, 1961, A LE GAL FICTION HAS BEEN CREATED FOR DEEMING THE DISSOLVED FIRM TO EXIST AND IT IS DEEMED TO EXIST UNDER THE INCOME-TAX ACT ONLY FOR THE PURPOSE OF ASSESSMENT A ND NOT FOR ANY OTHER PURPOSE. SECTION 189 CANNOT EXTEND TO INCOME OR PROFITS WHICH CAN BE SAI D TO HAVE ACCRUED, ARISEN OR BEEN RECEIVED AFTER THE DISCONTINUANCE OF SUCH BUSINESS OR DISSOL UTION OF THE FIRM. SECTION 189 DOES NOT LAY DOWN PROCEDURE FOR ASSESSMENT IN SUCH CASES. THEREF ORE, WHETHER UNDER SECTION 47 OF THE PARTNERSHIP ACT, 1932, OR UNDER SECTION 189 OF THE INCOME-TAX ACT, THE EXISTENCE OF THE DISSOLVED FIRM OR CONTINUING OF THE BUSINESS BY THE FIRM HAS BEEN ASSUMED FOR A LIMITED PURPOSE AND THE FICTION CANNOT BE CARRIED BEYOND THE PURPOSE FOR WH ICH IT HAS BEEN ENACTED. THE PROVISIONS OF SECTION 189(1) READ WITH SECTION 176(3A) MAKE IT CL EAR THAT A FIRM CANNOT BE DEEMED TO BE IN 8 EXISTENCE IN RESPECT OF ASSESSMENT FOR ANY PERIOD A FTER ITS DISSOLUTION OR DEEMED TO CARRY ON BUSINESS AFTER IT HAS PARTED WITH ITS BUSINESS. ASS UMING THAT THE DISSOLUTION OF THE FIRM AMOUNTED TO DISCONTINUANCE OF BUSINESS BY THE FIRM AND RECEI PTS ARE COVERED BY SECTION 176(3A), THE FIRM HAVING CEASED TO EXIST ON ITS DISSOLUTION CANNOT BE TAXED WITH THE AID OF SECTION 189(1). THE ONLY PERSONS WHO COULD BE ASSESSED IN RESPECT OF THE REC EIPTS ARE THE PARTNERS WHO ACTUALLY RECEIVED IT.----------- (IV)------PAGE 882------ WE MAY ALSO NOTICE HERE TH AT BUT FOR THE PROVISION OF SUB-SECTION (3A) OF SECTION 176 ANY RECEIPT AS A RESULT OF REALISING AN Y ASSET OF THE FIRM BY THE PARTNERS WOULD HAVE BEEN A CAPITAL RECEIPT IN THEIR HANDS AND NOT TAXA BLE. IT IS ONLY BY DINT OF THIS PROVISION THAT IF I T WERE INCOME OF THE FIRM HAD IT BEEN RECEIVED BY TH E FIRM WHILE IT CARRIED ON THE BUSINESS, IT CAN BE TAXED IN THE HANDS OF THE PARTNERS IF THE SAME I S RECEIVED AFTER ITS DISCONTINUATION OF BUSINESS BY DISSOLUTION OF THE FIRM.------ 9. THE LD. D.R. DREW OUR ATTENTION TO THE PROVISION OF SECTION 189(1) OF THE INCOME TAX ACT, ACCORDING TO WHICH FIRM WOULD CONTINUE TO BE IN EXI STENCE EVEN AFTER THE DISSOLUTION AND, THEREFORE, AWARD RECEIVED BY IT WOULD BE TAXABLE IN THE HANDS OF THE FIRM AND SINCE THERE WAS NO REGISTRATION OF THE FIRM, IT CAN BE TAXED IN THE HA NDS OF AOP FOR WHICH SEPARATE ACTION HAS BEEN TAKEN BY THE REVENUE BY ISSUING NOTICE UNDER SECTIO N 148 AND ON WHICH APPEAL IS ALSO PENDING BEFORE US AS ABOVE. 10. AGAINST THIS, THE LD. A.R. FOR THE ASSESSEE SUB MITTED THAT THE DEPARTMENT HAS MISCONSTRUED AND MISUNDERSTOOD THE DECISION OF THE HON'BLE GUJAR AT HIGH COURT IN THE CASE OF BANYAN AND BERRY (SUPRA). THE AMOUNT OF AWARD WOULD BE TAXABLE IN THE HANDS OF RECIPIENT ONLY WHEN BUSINESS IS DISCONTINUED BY VIRTUE OF SECTION 176(3 A). PROVISION OF SECTION 176(3A) WOULD BE APPLICABLE ONLY WHEN THE BUSINESS IS DISCONTINUED A ND, THEREFORE, FOR THE PURPOSES OF TAXING THE SUM RECEIVED AFTER DISCONTINUANCE OF BUSINESS BY A PERSON, A DEEMING FICTION IS CREATED AND THE SUM SO RECEIVED AFTER DISCONTINUANCE OF BUSINESS WO ULD BE TAXABLE IN THE HANDS OF RECIPIENT. BUT IN THE PRESENT CASE, THE BUSINESS CONTINUED BY THE COMPANY NAMELY M/S RUPAL CONSTRUCTION PVT. LTD. AND, THEREFORE, THE PROVISION OF SECTION 176(3 A) WOULD NOT BE APPLICABLE. HE REFERRED TO THE DECISION OF ITAT, RAJKOT BENCH IN THE CASE OF ASSES SEE (SUPRA), WHEREIN IT WAS HELD THAT IF THE JUDGMENT IS READ MINUTELY THEN ONLY ONE CONCLUSION IS ARRIVED THAT THE FACTS ARE IDENTICAL IN THE CASE IN HAND AS WELL AS IN THE CASE OF HON'BLE GUJA RAT HIGH COURT. ONCE A COORDINATE BENCH HAS HELD THAT THE FACTS IN THE PRESENT CASE ARE IDENTIC AL WITH THE FACTS OF BANYAN AND BERRYS CASE, THEN THE DECISION RENDERED BY THE HON'BLE GUJARAT H IGH COURT IN THAT CASE WOULD AUTOMATICALLY 9 FOLLOW AND WOULD BE BINDING ON OTHER BENCHES WORKIN G IN THE JURISDICTION OF HON'BLE GUJARAT HIGH COURT. THE LD. A.R. SUBMITTED THAT FOR INVOKIN G THE PROVISIONS OF SECTION 176(3A), FOLLOWING FOUR CONDITIONS MUST BE SATISFIED :- (I) THERE MUST BE A DISCONTINUANCE OF A BUSINESS. ( THE MOST IMPORTANT CONDITION PRECEDENT FOR SECTION 176(3A) TO APPLY TO THE RECIP IENT). (II) SOME AMOUNT MUST BE RECEIVED AFTER THE DISCONT INUANCE OF BUSINESS BY A PERSON WHO WAS CARRYING ON DISCONTINUED BUSINESS OR ANY OTHER PERSON. (III) SUCH RECIPIENT WILL BE TAXED IF THE PERSON WH O CARRIED ON THE DISCONTINUED BUSINESS WOULD HAVE BEEN AXED IF THE AMOUNT WAS RECEIVED BY SUCH PERSON BEFORE SUCH DISCONTINUANCE, AND (IV) THE AMOUNT WILL BE TAXED IN THE HANDS OF THE RECIPIENT IN THE YEAR OF RECEIPT. 11. THUS, IF AN AMOUNT IS RECEIVED BUT IT IS NOT A CASE OF DISCONTINUANCE OF BUSINESS THEN NEITHER THE FIRM, WHICH IS DISSOLVED AND NOT IN EXI STENCE WHEN THE AMOUNT IN QUESTION WAS ACCRUED OR RECEIVED, NOR THE EX-PARTNERS, WHO HAVE RECEIVED THE AMOUNTS OR EVEN THEIR AOP CAN BE TAXED UNDER SECTION 176(3A). IN THIS REGARD, LD. A.R. REFERRED TO FOLLOWING OBSERVATIONS OF HONBLE GUJARAT HIGH COURT IN BANYAN AND BERRY VS. - CIT (1996) 222 ITR 831 (GUJ.) :- (I) ------(PAGE 883)--------- THEREFORE, IN THE FIR ST INSTANCE NO QUESTION OF TRANSFER OF INCOME ARISES. RECEIPTS UNDER THE AWARD, BY THE PARTNERS AFTER DISSOLUTION OF THE FIRM WOULD ORDINARILY BE CAPITAL RECEIPTS IN THEIR HANDS WHEN RECEIVED, BUT FOR THE LEGAL FICTION CREATED UNDER SECTION 176(3A). IT IS APPARENT THAT UNDER SECTION 176(3A) SUCH RECEIPTS BECOME INCOME ONLY WHEN THEY ARE RECEIVED BY THE RECIPIENT AND ARE NOT TREATED AS INCOME AT EARLIER POINT OF TIME. THEREAFTER, WHEN THE FIRM STOOD DISSOLVED IT DID NOT HAVE ANY I NCOME WHICH IT COULD TRANSFER. WHEN THE PARTNERS RECEIVED, IT WAS NOT AS A RESULT OF THE TR ANSFER OF INCOME, BUT AS A DISBURSEMENT OF ASSETS ON DISSOLUTION OF THE FIRM.-------- (II)---------(PAGE880)----- DISSOLUTION OF THE FIRM IS LIKE ITS DEMISE. AFTER ITS DISSOLUTION WHATEVER HAPPENS, MAY AFFECT ITS ERSTWHILE PARTNERS AS ITS S UCCESSOR IN INTEREST BUT CANNOT BE CONSIDERED THE ACT OF THE FIRM, CONSIDERING IT TO BE DISTINCT FROM THE PARTNERS CONSTITUTING IT. RECEIPT OF SUMS UNDER AWARD BY THE PARTIES AFTER THE DISSOLUTION O F FIRM CANNOT BE TAKEN AS RECEIPT BY THE FIRM. (III)--------(PAGE877)---- AT THIS POINT, WITHOUT G OING INTO THE QUESTION WHETHER IT IS A CASE OF DISCONTINUANCE OF THE BUSINESS DISTINCT FROM SUCCES SION OR NOT, IT IS TO BE NOTICED THAT SECTION 176(3A) ENVISAGES TWO PREMISES ; ONE THAT ANY SUM RECEIVED AFTER DISCONTINUANCE MUST BE THE TAXABLE INCOME OF THE PERSON WHO CARRIED ON THE BU SINESS, HAD SUCH SUM BEEN RECEIVED BEFORE SUCH DISCONTINUANCE ; SECONDLY, IT RENDERS SUCH RE CEIPTS TAXABLE IN THE HANDS OF THE RECIPIENT. THESE TWO THINGS CLEARLY POSTULATE THAT IN THE APPL ICABILITY OF SUB-SECTION (3A) OF SECTION 176, THE 10 PERSON CARRYING ON THE BUSINESS WHOSE INCOME IT WO ULD HAVE BEEN HAD IT BEEN RECEIVED BEFORE ITS DISCONTINUANCE, AND THE RECIPIENT IN WHOSE HAND S THE INCOME IS TAXABLE NEED NOT BE THE SAME. THE RECIPIENT OF SUCH SUM WOULD BE LIABLE TO TAX AS IF IT WERE THE INCOME OF THE RECIPIENT IN THE YEAR OF ITS RECEIPT. WHILE UNDER SECTION 189 A DEE MING PROVISION HAS BEEN MADE FOR THE PURPOSE OF MAKING ASSESSMENT THAT THE BUSINESS HAS NOT BEE N DISCONTINUED OR THE FIRM HAS NOT BEEN DISSOLVED, THAT IS TO SAY, THE FICTION HAS BEEN CRE ATED ONLY FOR THE PURPOSE OF APPLYING THE MACHINERY PROVISIONS IN RESPECT OF THE SAME ASSESS EE UNDER THE SAME STATUS OF THE FIRM. SUB- SECTION (3A) OF SECTION 176 MAKES NO SUCH DEEMING PROVISION TREATING THE PERSON WHO HAS CARRIED ON.----------- 12. ANOTHER SIMILAR DECISION HAD, IN FACT, COME F ROM THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- SAUARASHTRA PACKAGING PVT. LTD. [259 I TR 520], WHERE ONE OF THE EX-PARTNER BEING A COMPANY HAD TAKEN OVER THE RUNNING BUSINESS OF PART NERSHIP FIRM AND HAD RECEIVED REFUND OF SALES TAX PAID BY THE PARTNERSHIP BEFORE DISSOLUTIO N. ON THIS ASPECT, THE HON'BLE GUJARAT HIGH COURT HELD THAT PROVISION OF SECTION 176(3A) IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS IT CAN BE APPLIED ONLY WHEN THERE WAS DISCONTINUANC E OF BUSINESS. THE LD. A.R. FURTHER SUBMITTED THAT THERE IS NO AOP OF EX-PARTNERS AND RELIED ON T HE FOLLOWING CASES :- (I) 2 ITC 110 CIT VS.- M.H. SANJANA & CO. LTD. , (II) (1953) 23 ITR 314 (PAT.) KANIRAM GANPATRAI VS.- CIT, (III) (1963) 47 ITR 781 (MAD.) METTUR SANDALWOOD OIL CO. VS.- CIT, (IV) (1980) 126 ITR 773 (KER.) S.P.V. BANK LTD. VS.- CIT, (V) (1987) 168 ITR 416 (KER.) CIT VS.- KAR VAL VES LTD., (VI) (1989) 176 ITR 238 (MAD.) P.V. GAJAPATHI R AJU VS.- CIT 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW THE DEPARTMENT HAS NOT CORRECTLY AP PRECIATED THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN BANYAN AND BERRYS CASE (SUPRA). NO D OUBT, THE HON'BLE GUJARAT HIGH COURT IN THAT CASE SAID THAT THE AMOUNT WOULD BE TAXABLE IN THE HANDS OF THE RECIPIENT, I.E. THE PARTNERS, BUT THERE ARE RIDERS AT SEVERAL PLACES AND WHICH IS THA T THERE SHOULD BE A DISCONTINUANCE OF BUSINESS. THEREFORE, ASSUMING THAT THE DISSOLUTION OF THE FIR M AMOUNTED TO DISCONTINUANCE OF BUSINESS BY THE FIRM AND RECEIPTS ARE COVERED BY SECTION 176(3A ), THE FIRM HAVING CEASED TO EXIST ON ITS DISSOLUTION CANNOT BE TAXED WITH THE AID OF SECTION 189(1). THE ONLY PERSONS WHO COULD BE ASSESSED IN RESPECT OF THE RECEIPTS WERE THE PARTNE RS WHO HAD ACTUALLY RECEIVED IT. THIS IS ALSO STRENGTHENED FROM THE FACT THAT SUB-SECTIONS (3A) A ND (4) FORM PART OF SUBSTANTIVE PROVISION 11 WHILE SUB-SECTIONS (1), (2) AND (3) ARE MACHINERY P ROVISIONS IN THE CASE OF BUSINESS, WHICH HAS BEEN DISCONTINUED. SUB-SECTION (3A) DEALS WITH THE RECEIPTS OF BUSINESS OR PROFESSION WHICH HAS CEASED TO EXIST AND ARE RECEIVED AFTER SUCH CESSATI ON EITHER BY THE PERSON, WHO WAS REALLY CARRYING ON THE BUSINESS OR SUCCESSOR IN INTEREST W HO RECEIVES IT. THE OBSERVATION ON WHICH THE LD. D.R. HAS RELIED UPON CANNOT BE READ IN ISOLATIO N AND ENTIRE JUDGMENT HAS TO BE LOOKED AS A WHOLE. AT SEVERAL PLACES, THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT FOR TAXING THE MONEY RECEIVED AFTER DISSOLUTION, THE BUSINESS SHOULD BE DISCONTINUED. IF SECTION 176(3A) PROVIDES A LEGAL FICTION BY TAXING THE SUM RECEIVED AFTER DISC ONTINUATION OF BUSINESS THEN ITS AREA OF OPERATION CANNOT BE EXTENDED THAN WHAT HAS BEEN PRE SCRIBED IN THAT SECTION. FOR THE SAKE OF CLARITY, WE RE-PRODUCE SECTION 176(3A), WHICH READS AS UNDER :- (3A) WHERE ANY BUSINESS IS DISCONTINUED IN ANY YEAR , ANY SUM RECEIVED AFTER THE DISCONTINUANCE SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT A ND CHARGED TO TAX ACCORDINGLY IN THE YEAR OF RECEIPT, IF SUCH SUM WOULD HAVE BEEN INCLUDED IN TH E TOTAL INCOME OF THE PERSON WHO CARRIED ON THE BUSINESS HAD SUCH SUM BEEN RECEIVED BEFORE SUCH DISCONTINUANCE THERE ARE CLEAR CIRCUMSTANCES DESCRIBED IN THE ABOV E SECTION AS TO WHEN SOME RECEIPT BY THE RECIPIENT WOULD BE CHARGED TO TAX, IN THE YEAR OF R ECEIPT. IT IS WHERE ANY BUSINESS IS DISCONTINUED IN ANY YEAR. THUS FOR INVOKING SECTION 176(3A) THE FOREMOST FINDING REQUIRED TO BE GIVEN BY THE AUTHORITIES IS THAT BUSINESS IS DISCONTINUED. IN TH E PRESENT CASE, IT IS AN UNDISPUTED FACT THAT BUSINESS HAS BEEN TAKEN OVER AND CONTINUED BY M/S. RUPAL CONSTRUCTION CO. THEREFORE, THE VERY FIRST CONDITION FOR INVOKING SECTION 176(3A) DID NO T SATISFY. IN THIS REGARD, FOLLOWING OBSERVATIONS OF THE HON'BLE GUJARAT HIGH COURT IN BANYAN AND BERRYS CASE ARE IMPORTANT AND ARE REPRODUCED AS UNDER :- I)----------ORDINARILY, UNDER THE INCOME-TAX ACT AS SESSMENT IS MADE FOR THE ASSESSMENT YEAR IN RESPECT OF THE INCOME EARNED BY THE ASSESSEE DURING THE PREVIOUS YEAR ENDING BEFORE THE COMMENCEMENT OF THE ASSESSMENT YEAR. SECTIONS 170 AND 176 BOTH PROVIDE EXCEPTIONS TO THE RULE AND PERMIT ASSESSMENT OF THE INCOME OF THE YE AR DURING THE SAME YEAR, WHERE BUSINESS IS DISCONTINUED.---------- II) -----------THEREFORE, THE CONCLUSION, IN OUR O PINION, IS IRRESISTIBLE, THAT SECTION 189(1) BY ITS ELF DOES NOT AUTHORISE ASSESSMENT OF THE FIRM IN RESPE CT OF ANY INCOME EARNED AFTER IT CEASED TO EXIST AND THE DEEMING PROVISION OF TREATING THE INCOME O F THE FIRM AS IF SUCH DISSOLUTION OR DISCONTINUATION OF ITS BUSINESS HAS NOT TAKEN PLACE IS APPLICABLE ONLY IN RESPECT OF THE INCOME 12 WHICH HAS BEEN EARNED BY IT PRIOR TO ITS DISSOLUTIO N OR DISCONTINUANCE OF BUSINESS BY IT. THE FICTION CREATED UNDER SECTION 189 DOES NOT PROJECT INTO THE FUTURE TRANSACTIONS.--------- III)------------THOUGH IT WAS ARGUED IN THIS REGARD BY LEARNED COUNSEL, IT WAS NOT IN DISPUTE THAT AL L THE AUTHORITIES ARE IN FAVOUR OF TREATING DISCONTI NUANCE OF THE BUSINESS AND SUCCESSION OF THE BUSINESS AS TWO DIFFERENT EXIGENCIES AND ORDINARIL Y SUCCESSION OF BUSINESS DOES NOT RESULT IN DISCONTINUANCE OF THE BUSINESS.---------- IV)---------WE MAY ALSO NOTICE HERE THAT BUT FOR TH E PROVISION OF SUB-SECTION (3A) OF SECTION 176 ANY RECEIPT AS A RESULT OF REALISING ANY ASSET OF T HE FIRM BY THE PARTNERS WOULD HAVE BEEN A CAPITAL RECEIPT IN THEIR HANDS AND NOT TAXABLE. IT IS ONLY BY DINT OF THIS PROVISION THAT IF IT WERE INCOME O F THE FIRM HAD IT BEEN RECEIVED BY THE FIRM WHILE IT CARRIED ON THE BUSINESS, IT CAN BE TAXED IN THE HANDS OF THE PARTNERS IF THE SAME IS RECEIVED AFTER ITS DISCONTINUATION OF BUSINESS BY DISSOLUTION OF THE FIRM.----------- V)----------RECEIPTS UNDER THE AWARD, BY THE PARTN ERS AFTER DISSOLUTION OF THE FIRM WOULD ORDINARILY BE CAPITAL RECEIPTS IN THEIR HANDS WHEN RECEIVED, BUT FOR THE LEGAL FICTION CREATED UNDER SECTION 176(3A).----------- VI)---------WHEN THE PARTNERS RECEIVED, IT WAS NOT AS A RESULT OF THE TRANSFER OF INCOME, BUT AS A DISBURSEMENT OF ASSETS ON DISSOLUTION OF THE FIRM.- ---- VII)---------WE MAY ALSO NOTICE HERE THAT BUT FOR T HE PROVISION OF SUB-SECTION (3A) OF SECTION 176 ANY RECEIPT AS A RESULT OF REALISING ANY ASSET OF T HE FIRM BY THE PARTNERS WOULD HAVE BEEN A CAPITAL RECEIPT IN THEIR HANDS AND NOT TAXABLE. IT IS ONLY BY DINT OF THIS PROVISION THAT IF IT WERE INCOME O F THE FIRM HAD IT BEEN RECEIVED BY THE FIRM WHILE IT CARRIED ON THE BUSINESS, IT CAN BE TAXED IN THE HANDS OF THE PARTNERS IF THE SAME IS RECEIVED AFTER ITS DISCONTINUATION OF BUSINESS BY DISSOLUTION OF THE FIRM. UNDER SECTION 176(3A) THE SUM IS DEEM ED TO BE THE INCOME OF RECIPIENT WHEN RECEIVED AND CANNOT BE TREATED AS INCOME OF EARLIE R YEAR. RECEIPT OF SUM IS THE BASIS OF TAXATION UNDER SECTION 176(3A). IN VIEW OF THIS WE ARE NOT I NCLINED TO FURTHER CARRY ON THE DISCUSSION WHETHER THE RECEIPTS IN RELATION TO THE CLAIMS ARI SING OUT OF CONSTRUCTION OF THE DAM AT MAZAM IRRIGATION WORK WAS A RECEIPT OF A DISCONTINUED BU SINESS OR OF A BUSINESS WHICH WAS THE SUBJECT- MATTER OF SUCCESSION.---------- 14. IN ADDITION, THE LD. A.R. HAS RIGHTLY RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN SAUARASHTRA PACKAGING PVT. LTD. (SUPRA). T HE HEAD NOTES FROM THE DECISION ARE RE- PRODUCED BELOW FOR THE SAKE OF CONVENIENCE :- THE ASSESSEE-COMPANY WAS ONE OF THE PARTNERS OF A FIRM. THE FIRM STOOD DISSOLVED WITH EFFECT FROM APRIL 1, 1983, AND THE BUSINESS OF THE FIRM WA S TAKEN OVER AS A GOING CONCERN BY THE ASSESSEE-COMPANY WITH EFFECT FROM APRIL 1, 1983, IN THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR 1984-85. THE ASSESSEE RECEIVED SALE S TAX REFUND OF RS. 33,303 IN THE PREVIOUS 13 YEAR RELEVANT TO THE ASSESSMENT YEAR 1984-85 AND RS . 12,887 AS SALES TAX REFUND IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1985-86. THE A SSESSING OFFICER INCLUDED THESE TWO AMOUNTS IN THE TOTAL INCOME OF THE ASSESSEE FOR THESE TWO Y EARS. THE TRIBUNAL TOOK THE VIEW THAT THE AMOUNT OF SALES TAX REFUND RECEIVED BY THE ASSESSEE -COMPANY IN THE ASSESSMENT YEARS 1984-85 AND 1985-86 WAS NOT TO BE INCLUDED IN THE TOTAL INC OME OF THE ASSESSEE. ON A REFERENCE : _HELD,_ (I) THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE INCOME-TAX ACT, 1961, THE IDENTITY OF THE ASSESSEE IN THE EARLIER YEAR IN WHICH DEDUCTION WAS GRANTED IN RELATION TO A TRADING LIABILITY AND IN THE SUBSEQUENT YEAR IN WHI CH BENEFIT IS DERIVED MUST BE THE SAME. SINCE THE IDENTITY OF THE ASSESSEE CHANGED AND THE REFUND WAS RECEIVED BY THE COMPANY, THE PROVISIONS CONTAINED IN SECTION 41(1) WERE NOT APPLICABLE AND THE AMOUNT OF SALES TAX REFUND RECEIVED BY THE ASSESSEE-COMPANY COULD NOT BE TAXED BY INVOKING THAT PROVISION. SARASWATI INDUSTRIAL SYNDICATE LTD. V. CIT [1990] 1 86 ITR 278 (SC) ; [1991] 70 COMP CAS 184 (SC) FOLLOWED. (II) THAT SECTION 176(3A) CAN BE APPLIED ONLY WHEN THERE WAS DISCONTINUANCE OF BUSINESS. SINCE THE BUSINESS WAS CONTINUED EVEN AFTER THE SAME WAS TAKEN OVER BY THE ASSESSEE-COMPANY, THE PROVISIONS OF SECTION 176(3A) OF THE ACT WERE NOT A PPLICABLE. (III) THAT SINCE THE AMOUNT OF SALES TAX REFUND REC EIVED BY THE ASSESSEE-COMPANY COULD NOT BE SAID TO BE A GAIN ACCRUING FROM THE TRANSFER WITHIN THE MEANING OF THE EXPLANATION TO SECTION 170(1)(B), THE SUM WAS NOT LIABLE TO BE TAXED IN TH E ASSESSMENT OF THE ASSESSEE-COMPANY BY VIRTUE OF SECTION 170(1)(B) READ WITH THE EXPLANATION THER ETO. (IV) THAT IT IS ONLY IF THE BENEFIT OR PERQUISITE I S NOT IN CASH OR MONEY THAT SECTION 28(IV) WOULD APPLY AND THE QUESTION OF INCLUDING THE VALUE OF SU CH BENEFIT OR PERQUISITE AS INCOME FROM BUSINESS WOULD EVER ARISE. SINCE WHAT WAS RECEIVED BY THE ASSESSEE-COMPANY WAS MONEY THERE WAS NO QUESTION OF CONSIDERING THE VALUE OF SUCH MO NETARY BENEFIT OR PERQUISITE UNDER CLAUSE (IV) OF SECTION 28 AND HENCE THERE WAS NO QUESTION OF IN CLUDING THE VALUE OF SUCH BENEFIT OR PERQUISITE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION BY INVOKING THE PROVISIONS OF SECTION 28(IV) OF THE ACT. CIT V. ALCHEMIC PVT. LTD. [1981] 130 ITR 168 (GUJ) FOLLOWED. (V) THAT THEREFORE, THE AMOUNT IN QUESTION COULD NO T BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 41(1 ) OR OF SECTION 176(3A) OR OF SECTION 170(1)(B) OR OF SECTION 28(IV). THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V S.- STAR ANIL ESTATE (1974) 208 ITR 573 (BOM.) HAS HELD THAT WHERE FIRM IS DISSOLVED, THE A SSESSMENT IN THE TOTAL INCOME OF SUCH FIRM CAN BE MADE BY THE ITO AS IF NO SUCH DISSOLUTION HAD TA KEN PLACE. SECTION 189 GIVES A FIRM A LIFE FOR THE PURPOSES OF ASSESSMENT UNDER THE ACT. IT DOES N OT PROVIDE FOR ASSESSMENT OF THE PARTNERS OF THE DISSOLVED FIRM. FOR THE SAKE OF CONVENIENCE, WE RE-PRODUCE HEAD NOTES FROM THE DECISION AS UNDER :- 14 A CAREFUL READING OF SECTION 189 AND SECTIONS 176(3 A) AND 176(4) MAKES IT ABUNDANTLY CLEAR THAT THE INCOME-TAX ACT CONTEMPLATES THAT WHERE A FIRM I S DISSOLVED, THE ASSESSMENT OF THE TOTAL INCOME OF SUCH FIRM SHALL BE MADE BY THE INCOME-TAX OFFICER AS IF NO SUCH DISSOLUTION HAD TAKEN PLACE. THE SAME IS THE POSITION IN THE CASE OF DISC ONTINUANCE OF THE BUSINESS OF THE FIRM. SECTION 189 KEEPS THE FIRM ALIVE FOR THE PURPOSES OF ASSESS MENT UNDER THE ACT DESPITE ITS DISSOLUTION. IT DOES NOT PROVIDE FOR ASSESSMENT OF THE PARTNERS OF THE DISSOLVED FIRM WHICH WAS THE POSITION UNDER SECTION 44 OF THE INDIAN INCOME-TAX ACT, 1922 , PRIOR TO ITS AMENDMENT IN THE YEAR 1958 AND WHICH IS THE POSITION UNDER SECTION 159 OF THE 1961 ACT IN RESPECT OF THE ASSESSMENT OF THE LEGAL REPRESENTATIVE OF A DECEASED ASSESSEE. THIS S ECTION, ON THE OTHER HAND, CLEARLY PROVIDES THAT THE DISSOLVED FIRM SHALL BE ASSESSED ON ITS TOTAL I NCOME AS IF NO SUCH DISSOLUTION HAS TAKEN PLACE. THE POSITION IS THUS CLEAR THAT DESPITE ITS DISSOLU TION, FOR THE PURPOSES OF LEVY OF TAX UNDER THIS ACT, THE DISSOLVED FIRM IS DEEMED TO BE IN EXISTENC E. SUB-SECTION (3A) OF SECTION 176 SPECIFICALLY PROVIDES THAT WHERE ANY BUSINESS IS DISCONTINUED IN A PARTICULAR YEAR, ANY SUM RECEIVED AFTER THE DISCONTINUANCE SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT AND SHALL BE CHARGED TO TAX ACCORDINGLY IN THE YEAR OF RECEIPT, IF SUCH SUM WOU LD HAVE BEEN INCLUDED IN THE TOTAL INCOME OF THE PERSON WHO CARRIED ON THE BUSINESS HAD SUCH SUM BEEN RECEIVED BEFORE SUCH DISCONTINUANCE. THIS SUB-SECTION THUS CREATES A LEGAL FICTION. IT I S INTENDED TO RESOLVE ALL DOUBTS IN REGARD TO TAXABILITY OF SUCH INCOME ON ACCOUNT OF DISCONTINUA NCE OF BUSINESS IN THE YEAR OF RECEIPT. OR, TO PUT IT DIFFERENTLY, IT MAKES AN EXCEPTION TO THE GE NERAL RULE THAT IN ORDER TO HOLD THE RECEIPTS CHARGEABLE TO TAX IN THE YEAR OF ITS RECEIPT THE BU SINESS MUST BE IN EXISTENCE IN THAT YEAR. SECTION 159 IS AKIN TO SECTION 44 OF THE INDIAN INC OME-TAX ACT, 1922, AS IT STOOD BEFORE THE AMENDMENT OF 1958 ACT. THE SCHEME OF ASSESSMENT OF INCOME OF A DISSOLVED FIRM ORIGINALLY WAS THE SAME AS THAT APPLICABLE TO A DECEASED ASSESSEE BUT THE SCHEME IS NO MORE APPLICABLE FOR THE ASSESSMENT OF THE INCOME OF DISSOLVED FIRMS. NOW, U NDER SECTION 189 OR UNDER THE AMENDED SECTION 44 OF THE 1922 ACT, THE INCOME-TAX OFFICER HAS TO MAKE AN ASSESSMENT OF THE TOTAL INCOME OF THE FIRM AS SUCH AS IF NO SUCH DISCONTINUANCE OR DISSOLUTION HAD TAKEN PLACE. THE ANALOGY OF SECTION 159 IS, THEREFORE, NOT APPLICABLE TO THE IN TERPRETATION OF SECTION 189. IT MAY ALSO BE PERTINENT TO MENTION THAT SECTION 176(3A) DEALS WIT H ALL ASSESSEES WHEREAS SECTION 189 DEALS ONLY WITH BUSINESS CARRIED ON BY FIRMS. 15. THE HON'BLE MADRAS HIGH COURT IN CIT VS.- WEST ERN AGENCIES MADRAS PVT. LTD. (2008) 305 ITR 301 HELD THAT IF A COMPANY TAKES OVER THE B USINESS OF THE FIRM BY TAKING OVER ASSETS AND LIABILITIES OF THE FIRM, THEN THE COMPANY CANNOT BE ASSESSED IN RESPECT OF THE INCOME OF THE PERIOD PRIOR TO DISSOLUTION OF THE FIRM. THE HON'BLE BOMBA Y HIGH COURT IN DHANNAYA SILK MILLS VS.- CIT (1998) 234 ITR 682 (BOM.) HELD THAT IN A CASE, AN AMOUNT RECEIVED AFTER DISSOLUTION OF THE FIRM, THEN FIRM WOULD BE ASSESSED ON ITS TOTAL INCO ME AS IF NO SUCH DISSOLUTION HAS TAKEN PLACE, IN RESPECT OF THE INCOME EARNED PRIOR TO DISSOLUTION B UT RECEIVED AFTER DISSOLUTION. FURTHER, IN THAT CASE ALSO, THERE WAS A DISCONTINUANCE OF BUSINESS I N THE YEAR OF RECEIPT. THE HON'BLE KERALA HIGH COURT IN CIT VS.- EXCEL PRODUCTION (1996) 217 ITR 528 (KERALA) HELD THAT IN A CASE, WHERE THERE WAS ONLY A CHANGE OF SITUATION OF THE FIRM, B UT BUSINESS CONTINUED BY NEWLY CONSTITUTED 15 FIRM, THEN SUBSIDY GRANTED BY THE STATE GOVERNMENT WOULD ACCRUE TO THE FIRM AS ORIGINALLY CONSTITUTED AND SECTION 176(3A) HAD NO APPLICATION. 16. ITAT, THIRD MEMBER BENCH IN ACIT VS.- HYT ENGI NEERING PVT. LTD. (2005) 276 ITR (A.T.) 199 (PUNE) HELD IN A CASE WHERE CASH COMPENS ATORY ASSISTANCE WAS RECEIVED BY A COMPANY TO WHICH BUSINESS WAS SOLD FOR A LUMPSUM CONSIDERAT ION THAT THE SUM SO RECEIVED CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE-COMPANY BY VIRTUE OF S ECTION 176(3A) AS BUSINESS CONTINUED BY THE SUCCESSOR COMPANY. IT IS CLEARLY HELD THEREIN THAT PROVISION OF SECTION 176(3A) WOULD BE APPLICABLE WHEN THERE WAS A DISCONTINUANCE OF BUSIN ESS. 17. FROM A COMBINED READING OF ALL THESE AUTHORITIE S, WE CALL OUT THE FOLLOWING PRINCIPLES :- (I) PROVISION OF SECTION 176(3A) WOULD BE APPLICA BLE ONLY WHEN THERE IS A DISCONTINUANCE OF BUSINESS. IF THERE IS A DISCONTIN UANCE OF BUSINESS THEN SUM RECEIVED AFTER DISCONTINUATION WOULD BE TAXED AS INCOME IN THE HAN DS OF THE RECIPIENT. RECEIPTS UNDER THE AWARD, BY THE PARTERRES AFTER DISSOLUTION OF THE FI RM WOULD ORDINARILY BE CAPITAL RECEIPTS IN THEIR HANDS WHEN RECEIVED, BUT FOR THE LEGAL FICTION CREA TED UNDER SECTION 176(3A) AND, THEREFORE, IT HAS TO BE CONSTITUTED STRICTLY. (II) SECTION 189(1) FOR DEEMING A DISSOLVED FIRM TO BE INEXISTENCE CAN BE INVOKED ONLY FOR TAXING A SUM ACCRUED PRIOR TO DISSOLUTION OF THE FIRM. IF ANY SUM ACCRUES AFTER THE DISSOLUTION OF THE FIRM, THEN FOR THE PURPOSE OF TA XING SEARCH POST DISSOLUTION, ACCRUAL OF INCOME UNDER SECTION 189(1) CANNOT BE INVOKED. THIS SECTIO N ONLY SUPPOSES EXISTENCE OF DISSOLVED FIRM FOR MAKING THE ASSESSMENT IN RESPECT OF THE INCOME ALREADY ACCRUED OR ARISEN TO THE FIRM PRIOR TO DISSOLUTION. (III) SECTION 170 DEALS THE SU CCESSION, WHICH CAN BE INVOKED IN RESPECT OF THE INCOME ACCRUED PRIOR TO SUCCESSION AND ALSO AFTER T HE SUCCESSION. THE PREDECESSOR ENTITY CAN BE TAXED IN RESPECT OF THE INCOME ACCRUED OR ARISEN PR IOR TO SUCCESSION AND SUCCESSOR FIRM CAN BE TAXED IN RESPECT OF THE INCOME ACCRUED OR ARISEN AF TER THE DATE OF SUCCESSION. IT PRE-SUPPOSES THAT BUSINESS CONTINUES AND ONE ENTITY IS SUCCEEDED BY A NOTHER ENTITY. IN THE PRESENT CASE, NO DOUBT THERE IS A SUCCESSION FROM THE FIRM M/S. PRABHAT CO NSTRUCTION CO. TO A LIMITED COMPANY, NAMELY M/S. RUPAL CONSTRUCTION PVT. LTD., BUT AMOUNT OF TH E AWARD IS NOT THE INCOME ACCRUED OR ARISEN 16 TO THE COMPANY. HOWEVER, IT HAS TO BE FOUND OUT AS TO WHEN THE AMOUNT OF AWARD ACCRUED AND WHEN IT WAS FINALLY QUANTIFIED. IN THIS REGARD, WE MAY REFER TO ARBITRATION A WARD DATED 28.04.1989 AT PARAS 3 TO 6. THIS DISPUTE PERTAINED TO TENDER AGREEMENT NO. LCB 1 OF 1983-84 AWARDED TO PRABHAT CONSTRUCTION CO. FOR A TENDER SUM OF RS.5,91,17,814.50 IN RESPEC T OF CONSTRUCTION OF THE DAM, WHICH WERE CONTINUED BY THE SUCCESSOR COMPANY NAMELY M/S. RUPA L CONSTRUCTION. THE TERMS OF THE DISPUTE REFERRED TO THE ARBITRATOR ARE AS UNDER:-- ARBITRATION FOR DISPUTES BETWEEN M/S. PRABHAT CONST RUCTION CO. (CLAIMANTS) AND GOVT. OF GUJARAT (RESPONDENTS) RE : THE WORK OF CON STRUCTING MASONRY DAM SPILLWAY FOR SIPU PROJECT AS MENTION IN GM/ID NO. SIP/4487/N /342/13/K DATED 7.9.87 AND ITS SUBSEQUENT AMENDMENT DATED 31.5.88 THE UNDERSIGNED IS APPOINTED AS SOLE ARBITRATOR UNDER THE ABOVE QUOTED MEMORANDA OF GOVT. OF GUJARAT FOR DECIDING DIS PUTES MENTIONED THEREIN BETWEEN THE PARTIES SUBJECT TO CERTAIN CONDITIONS. ONE OF THE CONDITIONS IS :- 'ALL AWARDS SHALL BE IN WRITING AND IN CASE OF CLAIMS FOR WHICH THE AMOUNT OF AWARD IS RS. 1 LAC OR ABOVE THE AWARDS SHALL BE IN WRITING WITH DETAILED REASONS FOR THE AMOUNT AWARDED AS PER CLAUSE NO.52 OF THE AGREEMENT. LATER ON PARTIES ALSO ENTERED INTO ARBITRATION AGREEMENT (IN THE FORM PRESCRIBED BY THE GOVT. OF GUJARAT) ON L7-09-87 AND 24-2-89. THE FOLLOWI NG IN BRIEF ARE THE REASONS FOR MY AWARD. 2. L.C. B, TENDER FOR THE ABOVE WORK WAS ACCEPTED IN FAVOUR OF THE CLAIMANTS M/S. PRABHAT CONSTRUCTION CO.UNDER AGR EEMENT NO.LCB/1 OF 1983-84 OF THE E.E. SIPU PROJECT ON, DESA. ACCEPTED TENDER AMOUNT WAS RS.5,91,17,814.50 AGAINST ESTIMATED AMOUNT OF RS.5,06,63,000/- PUT TO TENDER. THE ACCEPTED TENDER AMOUNT IS ABOUT 16.688 % ABOVE THE ESTIMATED A MOUNT PUT TO TENDER. THE ESTIMATE WAS BASED ON SOR OF 1982-83. WORK ORDER DATE WAS 24-2-B4 AND WITH STIPULATED 48 MONTHS CONSTRUCTION PERIOD, PR ESCRIBED DATE OF COMPLETION WAS 23.02.1988. LATER-ON CLAIMANTS HAVE APPLIED FOR EXTENSION IN TIME LIMIT AND THE MATTER IS UNDER CONSIDERATION OF THE RESPONDENTS. T HE WORK IS STILL IN PROCESS. 3. IT IS STATED THAT THE CLAIMANTS HAVE BEEN PAID 8 2 R.A. BILLS UPTO 31.3.1989 FOR CUMULATIVE TOTAL GROSS AMOUNT OF RS.5,37,55,297/-. THIS DOES NOT INCLUDE (I) EXTRA ITEMS PAYMENT OF RS.24,21,064/-, SECURED ADVANCE PA YMENT OF RS.2,37,671/- AND PRICE ESCALATION (PE) PAYMENT OF RS.40,68,545/-. THE P.E. PAYMENT INDICATES AN OVERALL INCREASE OF NEARLY 7.568% ON THE VALUE OF WORK DONE AT TENDERED RATES. MARCH 88 ENDING QUARTER GIVES PE OF 21.22% OVER NOV., 83 BAS E LINE. 4. MAIN CAUSES OF DISPUTES AND CLAIMS ARE :_ 17 (A) SIGNIFICANT INCREASES IN TENDERED QUANTITIES OF SEVERAL SCHEDULE B ITEMS BEYOND THE THRESHOLD LIMIT OF 30%. SUCH ITEMS THEN BECOME EXTRA ITEMS AS PER TENDER CLAUSE 31. (B) LOWERING OF FOUNDATION LEVELS REQUIRING INCREA SED DEWATERING EFFORTS. (C) CHANG OF RUBBLE QUARRY FROM ORIGINALLY ENVISAG ED BHAKODAR QUARRY TO DANTIWADA QUARRY. (D) CLEARING OF ROCK SURFACES MORE THAN ONCE FOR FO UNDATION OF THE DAM. (E) ALLEGATIONS OF CHANGE IN WORK SPECIFICATIONS. 5. IT MAY BE NOTED HERE THAT THE QUOTED TENDERED RA TES HAVE TWO COMPONENTS VIZ. (I) PRECISE RATE QUOTED PLUS/ MINUS (II) VARIABLE R ATE COMPONENT AS PER PRICE ADJUSTMENT (PA) FORMULA UNDER CLAUSE 32A OF THE TEN DER. HENCE WHILE DECIDING THE RATES OF TENDER ITEMS TURNED EXTRA ITEMS, IT HA S BEEN ASSUMED THAT DUE PAYMENTS AS PER QUOTED RATES WITH PA COMPONENT HAVE TO BE ALLOWED BY THE RESPONDENTS AS PER TENDER PROVISIONS AND ENHANCEMEN T IN RATES AND AMOUNTS ARE WORKED OUT AND AWARDED ACCORDINGLY ON THAT ASSU MPTION. 6. FURTHER WORK IS STILL IN PROGRESS AND FINAL QUAN TITIES OF CLAIMS ARE ONLY BROADLY ASSESSED. FINAL BILL MAY INDICATE SOME VARIATIONS I N CLAIM QUANTITIES THOUGH THEY ARE NOT EXPECTED TO BE SIGNIFICANT. HOWEVER, O UT OF ABUNDANT CAUTION IT IS CLARIFIED THAT EXTRA RATES AND AMOUNTS AWARDED WILL NOT BE PAYABLE IF IN A RARE CASE FINAL BILL QUANTITIES OF SCHEDULE B TENDER ITE MS DO NOT CROSS THE THRESHOLD LIMIT OF 30%. IF, HOWEVER, FINAL BILL QUANTITIES EX CEED THE CLAIM QUANTITIES, EXTRA AMOUNTS PAYABLE WILL BE LIMITED TO CLAIM QUANTITIES ONLY. 18. FOLLOWING POINTS EMERGE FROM THE ABOVE TERM S OF THE AWARD:- I) IT RELATED TO THE WORK AWARDED TO THE FIRM M/S PRA BHAT CONSTRUCTION CO. II) AGREEMENT TO REFER THE DISPUTE TO ARBITRATOR WAS BE TWEEN BETWEEN M/S. PRABHAT CONSTRUCTION CO. (CLAIMANTS) AND GOVT. OF GUJARAT ( RESPONDENTS) III) THIS REFERENCE WAS ON 07-09-1987 AT THE TIME WHEN T HE FIRM WAS IN EXISTENCE. SUBSEQUENT EVENT ON 31-05-1988 WAS ONLY AN AMENDME NT TO THE ORIGINAL REFERENCE. IV) IN RESPECT OF THAT WORK, THE ADDITIONAL CLAIMS WERE PURSUED BY THE FIRM WHICH ARE DESCRIBED ON PAGE 2 OF THE APPENDIX BY THE ARBITRAT OR IN THE AWARD. V) THE ARBITRATOR HAS POINTED OUT THAT 82 RUNNING ACCO UNTING BILLS UPTO 31.03.1989 FOR CUMULATIVE TOTAL GROSS AMOUNT OF RS.5,37,55,297 WERE PAID TO THE FIRM. 18 VI) THE ADDITIONAL CLAIMS & INTERIM AWARD WAS ALSO ANNO UNCED AND PUBLISHED ON 16.12.1988. VII) QUANTIFICATION OF AWARD WAS FINALLY DECIDED BY THE ARBITRATOR VIDE ITS ORDER DATED 28.02.1989. SINCE THE TIME CLAIMS WERE FILED, THEY PERTAINED T O THE WORK CARRIED ON BY THE PREDECESSOR FIRM, NAMELY M/S. PRABHAT CONSTRUCTION CO. AND CONTINUED TO BE PURSUED WITH ARBITRATOR, THEN IN OUR CONSIDERED VIEW AWARD HAS ACCRUED PRIOR TO DISSOLUT ION BUT IT IS ONLY THE QUANTIFICATION THAT WAS FINALLY DECIDED BY THE ARBITRATOR VIDE ITS ORDER DA TED 28.02.1989. THEREFORE, PERHAPS THE AMOUNT OF AWARD HAVING ACCRUED PRIOR TO THE DISSOLUTION OF THE FIRM COULD HAVE BEEN TAXED IN THE HANDS OF THE FIRM UNDER SECTION 189(1) BUT THE ISSUE HAD BEEN DECIDED BY THE ITAT, RAJKOT BENCH IN FAVOUR OF THE ASSESSEE FIRM IN THE FOLLOWING WORDS :_ 6. WE HAVE PERUSED THE RECORDS AS WELL AS GONE THR OUGH THE JUDGMENT OF GUJARAT HIGH COURT IN BANYAN & BERRY CASE. THE E XERCISE MADE BY THE LD. D.R. IN DISTINGUISHING THE JUDGMENT OF THE GUJA RAT HIGH COURT IS FATUOUS. IF THE JUDGMENT IS RED MINUTELY THEN ONLY ONE CONCLUSION IS ARRIVED, I.E. THE FACTS ARE IDENTICAL IN THE CASE IN HAND AS WELL AS IN THE CASE OF THE GUJARAT HIGH COURT. HON'BLE GUJARAT HIGH COURT AT P AGE 838 REPRODUCED THE CLAUSE 5() OF THE AGREEMENT DATED JULY 1, 1984 VIDE WHICH BANYAN & BERRY, A PARTNERSHIP FIRM TRANSFERRED AGREED TO TRA NSFER ITS BUSINESS TO A PRIVATE LIMITED CO. UNDER THE NAME AND STYLE OF BAN YAN & BERRY CONSTRUCTION CO. PVT. LTD. THE FIRM WAS AWARDED A C ONTRACT FOR CONSTRUCTION OF A DAM. THE SAID WORK WAS COMPLETED BY THE FIRM AND HANDED OVER TO THE STATE GOVERNMENT. IN ADDITION TO THE FINAL BILL AS SUBMITTED, THE FIRM HAS ALSO SUBMITTED FURTHER CLAI MS TO THE GOVERNMENT OF GUJARAT IN CONNECTION WITH THE SAID WORK. IT WAS AG REED THAT BENEFIT OF SAID CLAIM SHALL NOT STAND TRANSFERRED TO THE COMPANY AN D THE VENDERS SHALL BE ENTITLED TO PURSUE THE SAID CLAIMS AND RETAIN ANY A MOUNT THAT MAY BE ALLOWED BY THE GOVERNMENT OR OTHERWISE RECOVERED IN RESPECT OF THE SAID CLAIM. FOR THIS PURPOSE, THE VENDORS SHALL BE ENTIT LED TO USE THE FIRMS NAME AND STYLE AND TO BE IN THE SAID NAME AND STYLE. SIM ILARLY AT PAGE 839 CLAUSE NOS. (1) AND (2) OF THE DISSOLUTION DEED HAVE BEEN REPRODUCED. FROM THE ABOVE TWO CLAUSES, IT EMERGES THAT THE FIRM STOOD D ISSOLVED. THE CLAIM AGAINST THE STATE OF GUJARAT IN RESPECT OF THE CONT RACT OF CONSTRUCTION OF DAM SHALL BE TREATED AS ACTIONABLE CLAIM JOINTLY EN FORCEABLE BY THE PARTIES. THE GUJARAT HIGH COURT HAS DEALT WITH THE DIFFERENT PROVISIONS OF THE PARTNERSHIP ACT AND SPECIFICALLY POINTED OUT AT PAG E 855 OF THE JUDGMENT AS UNDER :_ EVEN IF NO SUCH AGREEMENT OF TREATING A PENDING CL AIM AS AN ACTIONABLE CLAIM AND DIVIDING IT IN THE PROFIT SHAR ING RATIO ON HAVING 19 A FAVOURABLE AWARD AND AUTHORIZING A FEW OF THE PAR TNERS TO PURSUE THE CLAIM HAD BEEN MADE PART OF THE DISSOLUTION DEE D IN QUESTION, THE SAME RESULT WOULD HAVE FLOWN FROM THE PROVISIONS OF SECTION 47 OF THE ACT. IN BANYAN & BERRY CASE CONSIDERING THE EFFECT OF TH E AGREEMENT, THE TRIBUNAL HELD THE FIRM TO BE IN EXISTENCE. THE HIGH COURT OB SERVED AT PAGE 856 AS UNDER :- CONSIDERING THE LEGAL EFFECT OF THESE TERMS IN THE AGREEMENT BY THE TRIBUNAL FOR HOLDING IN FAVOUR OF CONTINUATION OF E XISTENCE OF FIRM WERE WHOLLY IRRELEVANT AND UNWARRANTED. IN FACT, TH E CONCLUSION FILES IN THE FACE OF THE PROVISIONS OF THE PARTNERSHIP AC T. WHILE DEALING WITH SECTION 189(1) READ WITH SEC. 17 6(3A) THE HIGH COURT OBSERVED THAT THE FIRM CANNOT BE DEEMED TO BE IN EXISTENCE I N RESPECT OF THE ASSESSMENT FOR ANY PERIOD AFTER THE DISSOLUTION OR DEEMED TO CARRY ON BUSINESS AFTER IT HAS PARTED WITH ITS BUSINESS. HENCE, AFTER CONSIDERING THE OVERALL ASPE CT OF THE CASE, WE ARE OF THE OPINION THAT THE ABOVE JUDGMENT OF THE HIGH COURT I S SQUARELY APPLICABLE IN THE CASE IN HAND. THE APPEAL OF THE ASSESSEE I.E. ITA NO. 3 87/97 IS ALLOWED. THE LD. A.O. IS DIRECTED NOT TO TAX THE AMOUNT OF ARBITRATION AWARD I.E. RS.42,43,025/- IN THE HANDS OF THE APPELLANT FIRM. THE ISSUE HAVING BEEN SETTLED BY THE TRIBUNAL EVEN THOUGH THE TIME OF ACCRUAL OF MONEY OF THE AWARD WAS APPARENTLY NOT CONSIDERED. NOTWITH STANDING THIS IMPORTANT ASPECT, THE ISSUE HAVING BEEN DECIDED, IT IS NO LONGER CONSIDERED NEC ESSARY TO DEAL WITH THE MATTER FURTHER. 19. THUS EVEN THE FIRM CANNOT BE ASSESSED IN RESPEC T OF THIS SUM IN VIEW OF THE DECISION OF THE ITAT, RAJKOT BENCH RENDERED ON THE PRESUMPTION THAT AMOUNT OF AWARD HAD ACCRUED AND ARISEN SUBSEQUENT TO SUCCESSION/ DISSOLUTION OF THE FIRM. SO FAR AS THE QUESTION OF TAXING OF PARTNERS OF INDIVIDUAL SHARES RECEIVED AFTER THE AW ARD IS CONCERNED, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEES BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BANYAN AND BEERYS CASE (SUPRA). THE SU M COULD HAVE BEEN TAXED IN THE HANDS OF RECIPIENT ONLY WHEN BUSINESS HAD DISCONTINUED, BY I NVOKING PROVISIONS OF SECTION 176(3A). SINCE IT IS NOT A CASE, THUS INDIVIDUAL SHARE OF THE AWAR D CANNOT BE TAXED IN THE HANDS OF THE PARTNERS ALSO. THE QUESTION OF TAXING THE SUM IN THE HANDS O F AOP WOULD ALSO NOT ARISE AS AFTER DISSOLUTION OF THE FIRM, AOP COULD NOT BE DEEMED TO BE IN EXISTENCE. IN THIS REGARD, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RELYING ON THE DECISION OF THE HON'BLE GUJARAT HIGH 20 COURT IN BANYAN AND BERRYS CASE HELD THAT THERE WA S NOT EVEN A SUGGESTION THAT EXCEPT THE REALIZATION OF THE SUM IN QUESTION AFTER THE BUSINE SS OF THE FIRM WAS TAKEN OVER BY THE COMPANY, THERE WAS ANY INCLINATION OR ACT ON THE PART OF ERS TWHILE PARTNERS SUGGESTING TO CARRY ON THE BUSINESS FOR THE FIRM, WHICH HAD ACTUALLY CEASED AN D THERE WAS NO MATERIAL TO HOLD THAT THEY INTENDED TO CARRY ON THE BUSINESS OF THE FIRM CLAND ESTINELY OR IN ANY OTHER MANNER. ON THE OTHER HAND, ONCE THE FIRM HAD SOLD THE BUSINESS TO THE CO MPANY, IT CLEARLY INDICATED THEIR INTENTION NOT TO CARRY ON THE BUSINESS IN THE NAME OF THE FIRM OR IN JOINT OPERATION OF ALL THE PARTNERS. FOR AN AOP TO EXIST THERE SHOULD BE AN EVIDENCE OF JOINING OF THE PERSONS CONSTITUTING THE ALLEGED AOP, FOR CARRYING ON THE BUSINESS FOR THE PURPOSE OF SHA RING THE PROFIT. NO SUCH MATERIAL IS SHOWN BY THE ASSESSING OFFICER INDICATING SUCH AN INTENTION TO CARRY ON THE BUSINESS WHEN THE BUSINESS OF CONSTRUCTION OF DAM WAS TAKEN OVER BY THE COMPANY. FURTHER HONBLE GUJARAT HIGH COURT IN BANYAN AND BERRY CASE (SUPRA ) HELD THAT MERE DISTRIBUTION OF ASSET ON DISSOLUTION OF THE FIRM OR EFFORTS UNDERTAKEN BY TH E PARTNERS TO REALIZE THE ASSET OR ACTIONABLE CLAIM WOULD NOT TANTAMOUNT TO CARRYING ON OF BUSINE SS FOR THE PURPOSES OF APPLYING THE PROVISIONS OF SEC. 176(3A). SOME OF THE OBSERVATION S IN THIS REGARD AS MADE IN THE ABOVE REFERRED JUDGMENT ARE AS UNDER:- (I)--------PAGE 857------ THERE IS AMPLE AUTHORITY FOR THE PROPOSITION THAT THE REALISATION OF ASSETS BY A PERSON IN CHARGE OF THE WINDING UP OF T HE BUSINESS OWNED BY A PERSON OR IN CHARGE OF WINDING UP OF THE ENTITY IS NOT AN ACTIVITY WHICH CAN ORDINARILY BE CALLED BUSINESS AND CANNOT AMOUNT TO CARRYING ON BUSINESS ON THAT GROUND ALON E. IN CIT V. NATIONAL MILLS CO. LTD. (IN LIQUIDATION) [1958] 34 ITR 155 (BOM), CHIEF JUSTICE CHAGLA STATED THE GENERAL PRINCIPLE (AT PAGE 160) : ' THE ASSESSEE MAY STOP DOING BUSINESS ALTOGETHER, AND THESE ASSETS MAY CEASE TO HAVE THE CHARACTER OF BUSINESS OR COMMERCIAL ASSETS. THEN, THEY TAKE ON AN ENTIRELY DIFFERENT CHARACTER. THEY BECOME CAPITAL ASSETS, AND QUA THOSE ASSETS T HE ASSESSEE IS NOT CARRYING ON ANY BUSINESS, BUT QUA THOSE ASSETS THE ASSESSEE HAS BECOME THEIR OWNER. AS AN OWNER THE ASSESSEE MAY ALSO EXPLOIT THOSE ASSETS AND RECEIVE INCOME. BUT THE IN COME WHICH IT RECEIVES IS NO LONGER BUSINESS INCOME BECAUSE NO BUSINESS IS BEING CARRIED ON AND THE ASSETS ARE NOT BUSINESS ASSETS.' (II)---PAGE 859----- THE DICTUM OF LORD ATKIN OF T HE PRIVY COUNCIL IN LIQUIDATOR, RHODESIA METALS LTD. V. COMMISSIONER OF TAXES [1940] 3 ALL E R 422, 425 WAS : ' PRIMA FACIE, THE SALE BY A LIQUIDATOR OF THE WHOL E UNDERTAKING OF A COMPANY WOULD RESULT IN A CAPITAL ASSET. . . .' GREENE L. J. IN WILSON BOX (FOREIGN RIGHTS) LTD. V. BRICE (INSPECTOR OF TAXES) [1936] 20 TC 736 ; 3 ALL ER 728 (CA), AFFIRMING THE DECISION OF LAW RENCE J. TO THE EFFECT THAT CONSIDERATION 21 RECEIVED BY THE COMPANY IN LIQUIDATION WAS A CAPIT AL RECEIPT AND NOT A RECEIPT FROM THE CARRYING ON OF THE BUSINESS BY THE LIQUIDATOR, OBSERVED (AT PAGE 750 OF 20 TC) :--------- (III)------PAGE-860------ THE CALCUTTA HIGH COURT CAME TO THE CONCLUSION THAT (AT PAGE 380 OF 70 ITR) : ' . . . WHAT THE LIQUIDATOR HAS DONE IN OBTAINING T HE RECEIPT FOR RS. 5,00,000 IS THAT HE HAS SOLD AND/OR TRANSFERRED AND/OR ASSIGNED THE MINING LEAS E AND THE RIGHTS COMPLETELY AND FOR EVER AND FREE FROM ALL ENCUMBRANCES IN ORDER TO REALISE AND GET IN THE ASSETS OF THE COMPANY IN LIQUIDATION.' THE ALLAHABAD HIGH COURT IN VIJAY LAXMI SUGAR MILLS LTD. V. CIT [1972] 86 ITR 402, STATED THE GENERAL RULE TO BE (HEADNOTE) : 'WHEN THE LIQUIDATOR OF THE COMPANY IS ENGAGED IN M ERELY REALISING THE ASSETS OF THE COMPANY, HE CANNOT BE SAID TO BE CARRYING ON BUSINESS.'--- (IV)----PAGE861---- IN THE CASE OF INDRAPRASTHA STE EL INDUSTRIES LTD. V. ITAT [1973] 88 ITR 138, THE DELHI HIGH COURT TOOK THE VIEW THAT 'MERE REALI SATION OF INTEREST OF BUSINESS OR PROFITS OR SELLING ITS STORES AND SPARES AFTER THE CLOSURE OF BUSINESS IS NOT CONTINUATION OF BUSINESS'. THE SAME VIEW WAS EXPRESSED BY THE MADRAS HIGH COUR T IN THE CASE OF P. V. GAJAPATHI RAJU V. CIT [1989] 176 ITR 238, WHEN IT SAID THAT 'COLLECTION OF OUTSTANDING DUES D OES NOT AMOUNT TO CARRYING ON OF BUSINESS'. THE KERALA HIGH COURT IN THE CASE OF S. P. V. BANK LTD. V. CIT [1980] 126 ITR 773 T OOK THE VIEW THAT A BANKING COMPANY, THE BUSINESS OF WHICH HAS BEEN TAKEN OVER BY ANOTHER BANK IS NOT DOING BUSINESS WHEN IT IS ENGAGED IN REALIZING THE OUTSTANDING OF ITS TAKEOVER BUSINESS. THE SAME OPINION WAS EXPRESSED AGAIN BY THAT HIGH C OURT IN THE CASE OF CIT V. KAR VALVES LTD. [1987] 168 ITR 416 ( KER), WHEN THE REVENUE SOUGHT TO TAX THE COMPENSAT ION RECEIVED BY AND OUTSTANDING DUES FROM CUSTOMERS ON BEING REALISED BY THE COMPANY WHOSE BUSINESS WAS TAKEN OVER BY THE GOVERNMENT AND IT HELD THAT AFTER TAKEO VER OF ITS BUSINESS BY THE GOVERNMENT IF THE COMPANY IS BUSY REALISING THE COMPENSATION FROM GO VERNMENT AND OUTSTANDING DUES FROM CUSTOMERS, IT CANNOT BE HELD TO BE DOING ANY BUSIN ESS.---------- (V)-----PAGE-863--- IF IN THAT LIGHT THE FACTS OF T HE PRESENT CASE ARE VIEWED, THE FIRM HAD PARTED WITH ITS BUSINESS APPARATUS TO THE NEWLY INCORPORAT ED COMPANY, IT HAS RETAINED THE ACTIONABLE CLAIM IN RESPECT OF CONSTRUCTION OF THE DAM AT MAZ AM IRRIGATION PROJECT, WHICH WAS ALREADY COMPLETED INCLUDING THE UNDISPUTED PAYMENT HAVING BEEN RECEIVED BY THE ASSESSEE. ONLY THE DISPUTED CLAIM REGARDING THAT COMPLETED PROJECT REM AINED OUTSTANDING WAS RETAINED BY THE FIRM. THE PARTNERS OF THE FIRM MANIFESTED THEIR INTENTIO N NOT TO CARRY ON BUSINESS EXCEPT TO THE EXTENT OF REALISING THE ACTIONABLE CLAIM OUTSTANDING AGAI NST THE GOVERNMENT IN RESPECT OF THE TRANSACTION COMPLETED BEFORE TRANSFER OF THE BUSINE SS TO THE COMPANY AND AFTER DISSOLUTION OF THE FIRM THEY ACTED IN UNISON IN TERMS OF SECTION 47 O F THE INDIAN PARTNERSHIP ACT FOR THE PURPOSE OF REALISING THE ACTIONABLE CLAIM AND FOR DISTRIBUTIO N OF THE ASSETS OF THE DISSOLVED FIRM. APPLYING THE TEST LAID IN THE LAHORE ELECTRIC SUPPLY CO.'S C ASE [1966] 60 ITR 1 (SC ), IT WOULD BE APPROPRIATE TO SAY THAT IT WOULD BE LAYING DOWN STR ANGE LAW TO HOLD THAT WHERE A FIRM HAS CEASED TO EXIST, IT MUST STILL BE DEEMED TO CONTIN UE MERELY BECAUSE REALISATION OF ASSETS AND 22 LIQUIDATION OF LIABILITIES OF THAT BUSINESS REMAIN S TO BE COMPLETED. IN DOING SO, IT CARRIED ON NO BUSINESS ACTIVITY AS DISCUSSED ABOVE.---------- THE SAME PARTNERS HAVE BECOME SHAREHOLDERS IN THE COMPANY. THEREFORE, IT CANNOT BE SAID THAT ON ONE HAND, COMPANY IS DOING THE BUSINESS OF CONST RUCTION OF THE DAM AND SIMULTANEOUSLY THE SAME SHAREHOLDERS ARE DOING THE SAME BUSINESS AS AO P. THIS IS A SELF-CONTRADICTION AND CANNOT BE ACCEPTED. ACCORDINGLY, NO AOP CAN BE PRESUMED TO BE IN EXISTENCE AND, THEREFORE, THE SAID SUM OF AWARD CANNOT BE TAXED IN THE HANDS OF AOP AL SO. 20. AS A RESULT, ALL THE APPEALS FILED BY THE REVEN UE ARE DISMISSED. 21. THE CROSS OBJECTIONS FILED BY THE RESPECTIVE AS SESSEES ARE IN SUPPORT OF THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THEREF ORE, THEY ARE ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 30.10.2009 SD/- SD/- (T.K. SHARMA) (D.C. AGARWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 / 10 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) ALL THE ASSESSEES, (2) THE DEPARTMENT 3) THE CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.