Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Change in constitution of - Assessment year 1974-75 - Assessee firm consisted of three partners - During relevant year, one of partners died and business was continued by surviving partners in accordance with terms of partnership deed providing that firm would not stand dissolved on death or retirement of any partner - Whether in view of aforesaid term of partnership deed, it could be said that there was merely change in constitution of firm and, therefore, only one assessment had to be made for entire assessment year - Held, yes FACTS The assessee-firm consisted of three partners. During the relevant year, one of the partners, died and the business was continued for the remaining accounting year by the two surviving partners in accordance with the express term in the partnership deed which provided that the firm would not sand dissolved on the death or retirement of any partner. The assessee-firm filed two returns for that year relevant to the period's prior and subsequent to the death of the partner. The ITO held that there was merely a change in the constitution of the firm and, therefore, only one assessment had to be made for the entire year. The Tribunal upheld the view taken by the ITO. On reference : HELD The Tribunal was justified in taking the view that it was a case of merely a change in the constitution of the firm governed by section 187 and, therefore, two separate assessments for separate periods could not be framed. Note: The case was decided against the assessee. CASE REVIEW Girdharilal Nannelal v. CIT [1984] 147 ITR 529 (MP) [FB] followed and relied upon. CASES REFERRED TO Girdharilal Nannelal v. CIT [1984] 147 ITR 529 (MP)(FB). O.P. Namdeo for the Applicant. B.K. Rawat for the Respondent. JUDGMENT J.S. Verma, CJ.-This is a reference under section 256(1) of the Income-tax Act, 1961, to answer the following questions of law, namely : "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in the case of the assessee, there was no dissolution of the firm but only a change in its constitution in view of the specific clause in the partnership…

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