The death of a partner dissolves the partnership, and a new partnership cannot be formed between the representatives of the two families without the consent of all the existing partners.

Headnote:
PARTNERSHIP - DISSOLUTION - DEATH OF PARTNER - EFFECT - PARTNERSHIP ACT, 1932, SECTION 42 - INCOME TAX ACT, 1922, SECTION 16 (1) (B) - FIRM OR ASSOCIATION OF PERSONS - STATUS OF ASSESSEE.
Fact of the Case:

The assessee, "Seth Govindram Sugar Mills, Mahidpur Road, Proprietor Nandlal Bachhulal, Jaora", was a partnership firm consisting of Nandlal and Bachhulal. Nandlal died on December 9, 1945, leaving behind his widow, Banarasibai, and two minor sons. The question arose whether the partnership was dissolved upon Nandlal's death and whether a new partnership was formed between the representatives of the two families.
Finding of the Court:

The court held that the partnership between Nandlal and Bachhulal was dissolved upon Nandlal's death, as per section 42 of the Partnership Act, 1932. The court further held that there was no evidence to establish that a new partnership was formed between the representatives of the two families after Nandlal's death. However, the court found that a new partnership came into existence on December 13, 1949, when Venkatlal, Nandlal's son, attained majority and became a partner in the firm.
Issues: 1. Whether the partnership between Nandlal and Bachhulal was dissolved upon Nandlal's death. 2. Whether a new partnership was formed between the representatives of the two families after Nandlal's death.
Ratio Decidendi: 1. Section 42 of the Partnership Act, 1932, provides that a partnership is dissolved by the death of a partner. 2. There was no evidence to establish that a new partnership was formed between the representatives of the two families after Nandlal's death.
Final Decision: The court answered the questions referred to it as follows: 1. For the assessment year 1950-51, the status of the assessee was that of a firm within the meaning of section 16 (1) (b) of the Income Tax Act, 1922. 2. The Tribunal misdirected itself in law in reaching the conclusion that the parties could not be regarded as partners.

JUDGMENT

SUBBA RAO, J. -Tgese two appeals by certificate arise out of the judgment of tge High Court of Madhya Pradesh, Jabalpur, in Misc. Case No. 63 of 1961 from a reference under section 66 (2) of the Indian Income -tax Act, 1922, made by the Income -tax Appellate Tribunal, Bombay.

2. To appreciate the contention of the parties the following genealogy will be useful:

Kalooram Todi

Govindram (died in January 1943)

Madanlal (predeceased his father) = Jankibai

Gangaprasad (died in 1931)

Nandlal (d. 9.12.1945) = Banaraibai

Venkatlal (b. 13.12.1931) Bachhulal

Bacobhulal (b. 25 -1 -1935)

Radheyshyam (predeceased his father) = Shantibai Yishwanath (adopted) (b. 13 -4 -1941)

After the death of Kalooram Todi, his two sons by name Govindram and Gangaprasad constituted a joint Hindu family which owned extensive property in Jaora State and a Sugar Mill called "Seth Govindram Sugar Mills" at Mahidpur Road in Holkar State. In the year 1942 Bachhulal filed a suit for partition against Govindram and obtained a decree therein. In due course the property was divided and a final decree was made. We are concerned in these appeals only with the Sugar Mills at Mahidpur Road. After the partition Govindram and Bachhulal jointly worked the Sugar Mills at Mahidpur Road. After the death of Govindram in 1943, Nandlal, the 80n of Govindram and Bachhulal, as Kartas of their respective joint families, entered into a partnership on 28th September 1943, to carryon the business of the said Sugar Mills. Nandlal died on December 9, 1945, leaving behind him the members of his branch of the joint family, Bamely, the three widows and the two minor sons shown in the genealogy. After the death of Nandlal, Bachhulal carried on the business of the Sugar Mills in the name of "Seth Govindram Sugar Mills". For the assessment year 1950.51, the said firm applied for registration on the basis of the agreement of partnership dated 28th September 1943. The Income -tax Officer refused to register the partnership on the ground that after the death of Nandlal the partnership was dissolved and thereafter Bachhulal and the minors could be treated only as an association of persons. On that footing he made another order assessing the income of the business of the firm as that of an association of persons. Against the said orders, two appeals -one being Appeal No. 21 of 1955 -56 against the order refusing registration and the other being Appeal No. 24 of 1955•56 against the order of assessment -were filed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner dismissed both the appeals. In the appeal against the order of assessment, the Appellate Assistant Commissioner exhaustively considered the question whether there was any partnership between the members of the two families after the death of Nandlal and came to the conclusion that in fact as well as in law such partnership did not exist. Two separate Appeals, being Income -tax Appeal No. 8328 of 1957 -58 and Income -tax Appeal No. 8329 of 1957 -58, preferred to the Income -tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner were dismissed. The assessee made two applications to the Tribunal for referring certain questions .f law to the High Court, but they were dismissed. Thereafter, at the instance of the assessee the High Court directed the Tribunal to submit the following two questions for its decision and it accordingly did so:

"(1) Whether on the facts and in the circumstances of the case, the status of the assessee, "Seth Govindram Sugar Mills, Mahidpur Road, Proprietor Nandlal Bachhulal, Jaora", is an Association of Persons or a firm within the meaning of section 16 (1) (b) of the Income -tax Act".

"(2) Whether the order of the Appellate Tribunal is illegal on account of the Tribunal having committed an error of record and having omitted to consider the relevant material in the case."

The High Court, for reasons given in its judgment, held on the first

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