AIR 1966 SUPREME COURT 24 ::1965 3 SCR 488 ::1965 57 ITR 510 ::1965 2 ITJ 170 ::1965 Mah LJ 869 ::1965 MPLJ 918 ::1967 JabLJ 959 ::1965 2 SCJ 289 ::1965 2 SCWR 470

Supreme Court Of India

(From Madhya Pradesh)*

Hon'ble Judge(s): K. Subba Rao, J. C. Shah, S. M. Sikri , JJJ

(A) Partnership Act (9 of 1932) , S.42(c), S.31(1)— Applicability - Partnership consisting of only two partners - Contract to continue partnership by admitting legal representative or nominee of deceased partner - Effect of death of one partner - Partnership does not exist for taking in new partner - S. 42(c) does not apply to such a case - Surviving partner continuing business of partnership - He and other members of deceased partner's family do not constitute a firm within S. 16(1)(b). Income-Tax Act (11 of 1922) , S.16(1)(b)— AIR 1956 Nag 46 and 66 Cal W. N. 262, Overruled. Section 42(c) of the Partnership Act can appropriately be applied to a partnership where there are more than two partners. If one of them dies, the firm is dissolved; but if there is a contract to the contrary, the surviving partners will continue the firm. On the other hand, if one of the two partners of a firm dies, the firm automatically comes to an end and, there is then no partnership for a third party to be introduced therein and, there is no scope for applying cl. (c) of S. 42 to such a situation. Pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but it would be a new partnership. In this light S. 31 falls in line with S. 42. An agreement between the two pa....