Law: Income Tax Act, 1961

Section: 256(1),187

Law: Income Tax Act, 1961

Section: 256(1),187

Section 187 of the Income-tax Act, 1961 - Firm - Registration - Change in constitution of- Assessment year 1976-77 - During assessment year in question two minors admitted to benefits of partnership retired and remaining two partners executed a new deed of partnership - Before Tribunal it was not disputed that there was reconstitution of firm in terms of section 187(2), but question was whether two separate assessments in respect of broken periods were called for - However, Tribunal held that two assessments had to be made for pre-change and post-change periods - Whether Tribunal was justified in holding so - Held, no FACTS The assessee-firm had four partners during the assessment year 1976-77. The minor partners admitted to the partnership retired from the firm with effect from 30-9-1975. The remaining 2 partners executed a new deed of partnership with effect from 1-10-1975. The assessee claimed that two separate assessments were to be made in respect of two broken periods, i.e., one from the period 1-4-1975 to 30-9-1975 and the other for the period 1-10-1975 to 31-3-1976, and accordingly filed two sets of returns for the respective periods and separate accounts. The ITO held that it was a mere change in the constitution of the firm and made one assessment for the period before and after the reconstitution. On appeal, the AAC upheld the claim of the assessee. On second appeal, it was not in dispute before the Tribunal that there was reconstitution of the firm in terms of section 187(2), and the question was whether two separate assessments in respect of the broken periods were called for. The Tribunal held that two separate assessments had to be made for the broken periods. On reference: HELD In view of the in Vishwanath Seth v. CIT [1984] 146 ITR 249 where in the midst of an accounting year, there is a change in the constitution of the firm in terms of section 187(2 ), the assessment is to be made as required by section 187(1) on the firm as constituted at the time of making the assessment. In the cases falling under section 187, a single assessment is required to be made in respect of the income for the entire previous year, clubbing the income of both…

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