Law: Income Tax Act, 1961

Section: 187

Income-tax----Firm---Assessment---Change in constitution or succession---Partnership deed providing that firm not to be dissolved on death of partner---Death of partner---Surviving partners continuing firm and drawing up new partnership deed---Business continued and same books of account maintained prior to and after death of partner---New firm taking over all assets of old firm---No formal deed of dissolution executed nor intimation sent to Registrar of Firms with regard to change in constitution of firm---Old bank account continuing to be operated by new Firm---There is only change in constitution of firm--­One assessment for entire period before and after death of partner to be made---Indian Income Tax Act, 1961, Ss.187(2) & 188. In its accounting year relevant to the assessment year 1975-76, ended on March 31, 1975, the assessee-firm consisted of four partners. On October 22, 1974, one of the partners died and, on her death, the surviving three partners continued the partnership firm and they drew up a new deed of partnership to evidence the said partnership. The business of the firm was continued as usual and the same books of account as were being maintained prior to October 22, 1974, were continued after that date. The new firm took over all the assets of the old firm. No formal deed of dissolution was executed nor any intimation sent with regard to the change in the constitution of the firm to the Registrar of Firms. The bank was informed that instead of four partners earlier, there were now three partners in the firm. The old bank account was, however, not closed and it continued to be operated as earlier by the new firm also. The Income-tax Officer found that what resulted was only a change in the constitution of the firm and only one assessment was to be made for the entire period---April 1, 1974 to March 31, 1975. The Appellate Assistant Commissioner found that the partnership deed clearly provided that the death of a partner would not result in the dissolution of the firm and hence, the general provisions of the Partnership Act, 1932, would not apply and so it would not be a case of dissolution of the firm and, therefore, sustained the order of…

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