Law:

Section:

SECTION 188 OF THE INCOME-TAX ACT, 1961 - FIRM - SUCCESSION OF ONE FIRM BY ANOTHER - ASSESSEE-FIRM'S PARTNERSHIP DEED DID NOT PROVIDE FOR CONTINUATION OF FIRM IN CASE OF DEATH OF PARTNER - AFTER DEATH OF A PARTNER, ASSESSEE-FIRM WAS DISSOLVED AND NEW PARTNERSHIP DEED WAS EXECUTED ON SAME DATE BY WHICH A MINOR WAS ALSO ADMITTED TO PARTNERSHIP BENEFITS - FOR RELEVANT ASSESSMENT YEAR ASSESSEE FILED TWO RETURNS RELATING TO PERIOD BEFORE PARTNER'S DEATH AND PERIOD AFTER HIS DEATH - WHETHER IT WAS A CASE OF DISSOLUTION OF FIRM AND NOT OF CHANGE IN CONSTITUTION AND HENCE TWO SEPARATE ASSESSMENTS HAD TO BE MADE FOR THE AFORESAID PERIODS - HELD, ON FACTS, YES Facts The assessee-firm consisted of six partners, as was evidenced by the partnership deed which did not provide for continuation of firm in case of death of a partner. On 12-3-1968, one of the partners died. A deed of dissolution of partnership was executed on the same date. A new partnership deed dated 27-3-1968 was executed and a minor was also admitted to the benefits of the partnership. For the assessment year 1969-70, corresponding to accounting year ending on 21-10-1968, the assessee-firm filed two returns (i) for the period ending on 12-3-1968, i.e., up to the death of partner, and (ii) for the period from 12-3-1968 to 21-10-1968. The ITO was of the view that a single assessment for the entire accounting year had to be made. On appeal, the AAC upheld the assessee's claim on the basis that the old firm ceased to exist on its dissolution after the death of the deceased partner and the new firm which was formed under the new deed of partnership was a different and independent entity. On appeal by the revenue, the Tribunal upheld the AAC's order being of the view (i) that section 187(2) was not applicable ; (ii) that by virtue of section 42 of the Partnership Act, the firm automatically stood dissolved by the operation of law ; and (iii ) that any change in the constitution of the partners or their shares, therefore, could not be attributed to the old firm, as it was non-existent. On reference : Held The original partnership deed of the assessee-firm did not provide for the continuance of the partnership firm…

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