Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Registration - Change in constitution - Partnership deed consisting of three partners did not provide for continuation of partnership in the event of partner's death - On P's death, new partnership deed executed between surviving partners with new profit sharing ratio - New partnership carried on the same business with the same set of books but made separate accounts for profits and losses for relevant periods - New firm applied for registration and claimed two separate assessments by filing two separate returns one till P's death and other for subsequent period - ITO made one assessment for whole period applying provisions of section 187 - Whether ITO justified - Held, on facts, no Facts The assessee-firm was constituted by a deed of partnership dated 17-12-1963 with three partners, namely, P and Q each having two-fifth share and R, Q's wife, having one-fifth share. The deed did not provide for its continuation on the death of any of its partners. During the assessment year 1966-67 relevant to the accounting year ending 24-10-1965, P died on 19-4-1965. On 7-5-1965, another partnership deed was executed by Q and R (their respective shares being four-fifth and one-fifth). It was stipulated therein, inter alia, that the earlier partnership stood dissolved on P's death and that Q and R would continue the business of the old firm to be commenced immediately after its dissolution by taking over all its assets and liabilities. No balance was struck nor any valuation of his share was made on P's death. The new firm continued the same business in the same name without any gap with the same set of books but it, however, made separate accounts for profits and losses for the relevant period. It had also applied for registration in Form No. 12A on the basis that there was a change in its constitution and also obtained registration on that basis. For the aforesaid assessment year, it, however, claimed two separate assessments by filing two returns-one for the period between 1-11-1964 and 19-4-1965 (up to P's death) and the other for the period from 28-4-1965 up to 24-10-1965 (the end of the accounting period). The ITO,…

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