Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Assessment of - Change in constitution of - Assessment year 1966-67 - Whether where some partners are added and business as such is continued with assets and liabilities of firm earlier to change, then it would be a case of change in constitution of firm and, in such a case, it is incumbent on ITO to make one assessment on firm as constituted at time of making assessment - Held, yes FACTS The assessee-firm, named and styled "T.V." consisting of four partners, was constituted under an instrument of partnership dated 1-6-1958. The firm carried on wholesale business in grocery 'T.V.' was one of the partners in the said firm, representing the Hindu undivided family consisting of himself and his three sons. On 30-10-1965, a partition by metes and bounds was effected between the members of the Hindu undivided family of T.V. The amount that stood to his credit in his capital account, in the firm's account books, was also divided between T.V. and his three sons. The partners agreed that the three sons of T.V. should also be taken as partners in the said firm. In accordance with that agreement, the accounts of the old firm were settled on 30-10-1965, and the resultant profit and loss up to that date was shared between the four partners and credited to their respective accounts. On 31-10-1965, the three sons of 'T.V.' were taken in as partners and the four partners of the old firm continued to remain as partners in the new firm. The assets and liabilities belonging to the old firm were taken over by the new firm. The terms and conditions on which the new firm agreed to run the business were reduced to writing in a partnership deed executed on 4-12-1965. The deed recited that the new firm was brought into existence with effect from 31-10-1965. For the relevant assessment year the accounting year of which was from 1-4-1965 to 31-3-1966, the assessee-firm filed two returns declaring its incomes of Rs. 96,321 for the period 1-4-1965 to 30-10-1965, and Rs. 41,387 for the period 30-10-1965 to 31-3-1966. The assessee-firm claimed that there was a change in the constitution of the firm with effect from 31-3-1965, and that two…

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