Law: Income Tax Act, 1961

Section: 187,188

Income-tax-----Firm---Assessment---Death of partner---Reconstitution of firm with new partners---Two assessments to be made---Indian Income Tax Act, 1961, Ss. 187 & 188. By virtue of the insertion of the proviso to section 187(2) by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from April 1, 1975, where a partnership stands dissolved by the death of a partner, section 187 of the Income Tax Act, 1961, would not apply and the proper section would be section 188 of the Act. The assessee-firm as originally constituted consisted of three partners. One of them died on January 16, 1977. Thereafter, his widow and another person were taken as partners with effect from January 17, 1977. The assessee-firm filed two separate returns---one for the period up to January 16, 1977, and another for the remaining period. The Income-tax Officer, while assessing the firm, made a single assessment, taking the view that the case was governed by section 187(1) of the Act. The Tribunal held that section 188 was applicable and two assessments had to be made. On a reference: Held (i) that the Tribunal was justified in holding that section 188 was applicable in the case of the assessee; (ii) that two assessments had to be made, one for the period up to January 16, 1977, and the other for the period from January 17, 1977, onwards. CIT v. Isthmian Steamship Lines (1951) 20 ITR 572 (SC); CIT v. Kheta Sons & Co. (1986) 162 ITR 833 (MP) and Girdharilal Nannelal v. CIT (1984) 147 ITR 529 (MP) ref. JUDGMENT GULAB C. GUPTA, J.--This is a reference under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue for purposes of obtaining the decision of this Court, on the following questions of law: " (i) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the Income-tax Officer was not justified in making a single assessment of the firm instead of two assessments, one for the period up to January 16, 1977, and the other from the period January 17, 1977, onwards? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the…

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