Law:

Section:

Section 189 of the Income-tax Act, 1961 - Firm - Assessment after dissolution - Assessment year 1965-66 - Seven persons carried on business in partnership - On death of one of partner on 25-8-1964, remaining partners executed a deed of dissolution of said partnership and agreed to give over assets and liabilities of business to new partnership firm - On 25-9-1964, new firm was constituted under fresh deed of partnership, taking over all assets and liabilities of dissolved firm with effect from 26-8-1964- Whether finding of Tribunal that two firms were distinct and income of old firm could not be added to income of new firm was finding of fact that was binding on High Court - Held, yes - Whether, therefore, in such Circumstances, it could be concluded that Income-tax officer was not justified in aggregating income of two partnerships - Held, yes FACTS Seven persons carried on business in partnership. On 25-8-1964, one of the partners died. Though the partnership deed provided that the duration of the partnership would be at will and the death of a partners would not result in the dissolution of the firm, yet on 25-8-1964, the remaining 6 partners executed a deed of dissolution of the said partnership and agreed to give over the assets and liabilities of the business carried on by the firm to a new partnership firm with effect from 26-8-1964. On 25-9-1964, a fresh deed of partnership was also executed by the 6 partners and in the preamble it was recited that the new firm constituted thereunder would take over all the assets and liabilities, etc., of the dissolved firm with effect from 26-8-1964. The partners had also agreed to admit three minors to the benefits of the partnership. This new firm applied to the Income-tax-Officer for registration and was granted registration. For the assessment year 1965-66, the assessee firm filed two returns. One for the period ending on 25-8-1964 and other for the period from 26-8-1964 to 15-2-1965. The ITO however passed a single assessment order for both the periods. The AAC accepted the assessee's contention that the assessee-firm was a separate firm and, therefore, the income of the dissolved firm could not be included in…

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