A partner carrying on the business after dissolution succeeds within the meaning of Section 26(2) of the Indian Income Tax Act, as the partner is not the partnership entity, and there is succession in such circumstances.

Alfred Henry Lionel Leach, C.J.

1. The main question raised in this reference is whether a partner who continues the partnership business after the dissolution of the partnership succeeds to the business within the meaning of Section 26(2) of the Indian Income Tax Act, 1922. On the 16th September, 1935, the assessee and one Venkatarama Aiyar entered into a partnership for the production and exhibition of a cinema film called "Pathi Bhakthi". .The partnership continued until the month of May of the following year, when Venkatarama Aiyar retired from the partnership and was paid the amount of the profits which represented his share, namely, the sum of Rs. 9,524. Thereafter the film was exhibited by the assessee for his own benefit. For the assessment year 1937-38 the Income Tax authorities assessed Venkatarama Aiyar in respect of this sum of Rs. 9,524 and he paid the tax, but later the Income Tax authorities considered that they were wrong in so doing, and to have the question settled, the Commissioner of Income Tax has, under the provisions of Section 66(2) of the Act, referred the following question:

Whether the provisions of Section 26(1) or Section 26(2) of the Act are applicable to this case and the petitioner is liable to be assessed on the sum of Rs. 9,524 which represents the ex-partners share of the profits of the film business.

2. In his statement of the, case the Commissioner has very properly stated that should the Court answer this question against the assessee he would exclude the sum of Rs. 9,524 from the assessment of Venkatarama Aiyar, who, of course, would thereupon be entitled t6 a refund.

3. Section 26(2) reads as follows:

Where at the time of making an assessment under Section 23, it is found that the person carrying on any business, profession or vocation has been succeeded in such capacity by another person, the assessment shall be made on such person succeeding, as if he had been carrying on the business, profession or vocation throughout the previous year, and as if he had received the whole of the profits for that year.

4. For the assessee it is said that inasmuch as he was a partner in the business of exhibiting this film before he acquired the right to exhibit it for his sole benefit there could be no succession, because as part owner of the business he could not succeed to himself. This argument ignores the fact that a partner is not the partnership. A firm for the purposes of assessment to Income Tax is an entity quite distinct from the partners who compose it. In two cases which have come before this Court it has been accepted that where a partner carries on the business of the partnership after dissolution he does "succeed" within the meaning of Section 26(2). These cases are Karuppaswami Moopanar v. Commissioner of Income Tax, Madras [1934]2ITR284(Mad) and Commissioner of Income Tax, Madras v. Muthukaruppan Chettiar (1939)1MLJ482 . For the assessee it has been suggested that the judgments in these cases cannot be regarded as deciding the question because this proposition was not disputed. It is true that the argument which has been addressed to this Court was not addressed to the Court in the two cases mentioned; but the cases cannot be ignored for this reason. Obviously it was not considered to be worth while taking the point. If the partnership is an entity distinct from the partners there must be succession in circumstances such as we have here. The Rangoon High Court took the same view in In re The Commissioner of Income Tax, Burma v. N. N. Firm I.L.R.(1933) Rang. 501 : 2 I.T.R. 85 and the same view has been taken in England : see Michael Faraday, Rodgers and Eller v. Carter (1927) 11 Tax. Cases 565.

5. In the course of his arguments Mr. Ramaswami Aiyar has suggested that the decision of this Court in Kesava Rao v. Commissioner of Income Tax, Madras [1935]3ITR339(Mad) has application here, but this cannot be accepted. There the Court was merely concerned with the question whether there could