Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Change in constitution of - Assessment year 1974-75 - During relevant accounting period, one of partners of assessee-firm died - Next day a fresh deed was executed and two new partners were inducted - Accounts of deceased partner were closed and profit and loss account and balance-sheet till date of his dealth were prepared separately - Assessee filed two separate returns for two periods, prior and subsequent to death of partner - Whether it was only a change in constitution of firm for which one assesseement should be frame in accordance with section 187(1) as it stood prior to its amendment with effect from 1-4-1975 - Held, yes FACTS During the relevant accounting period, one of the partners of the assesee-firm died. On the very next day a fresh deed was executed inducting two new partners. The accounts of the deceased partner were closed and the profits and loss account and the balance-sheet till death of the partner were separately prepared. The assessee filed two returns, one prior and the other subsequent to the date of the partner's death. The ITO held that it was not a case of succession under section 188 but only a change in the constitution of the firm for which one assessment should be framed in accordance with section 187(1). He passed a single assessment order accordingly for the accounting period. On appeal, the Commissioner (Appeals) took the contrary view and held that two separate assessments should be framed for the two periods, prior and subsequent to the date of death of the partner, treating it as a case of succession under section 188. The Tribunal affirmed the view of the Commissioner (Appeals). On reference : HELD In view of the facts that the relevant period in the present case was prior to 1-4-1975, from which date section 187(2) was amended by introducting a proviso therein, this case had to be decided on the basis of section 187(2), as it stood prior to the amendment. Consequently, the Tribunal was not justified in law in affirming the order of the Commissioner (Appeals), directing the ITO to pass two separate orders for the two periods, before and after the date of death of the…

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