Law: Income Tax Act, 1961

Section: 188

Income-tax-----Firm---Assessment---Change in constitution or succession---Death of partner---No clause in partnership deed that firm to continue despite death of partner---Old firm stands dissolved---Two assessments to be made for two periods before and after death of partner---Indian Income Tax Act, 1961, S.188. One of the partners of the assessee-firm died and a new firm came , into being with the remaining partners and a newly inducted member. On a reference of the question whether the income of the firm for the two periods before and after the death of the partner, could be clubbed: Held, that there was no clause in the partnership deed containing an agreement to the effect that the partnership firm would not dissolve despite the death of the partner. This was a case of succession, failing under section 188 of the Income Tax Act, 1961, and the income of the firm for the two periods could not be clubbed. JUDGMENT At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench "B", Delhi, referred the following question for the opinion of this Court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law holding that the income of the two periods could not be clubbed?" The reference relates to the assessment year 1977-78. A partnership firm was originally constituted by four partners; of them, one of the partners, namely, Shankar Dass, died on September 16, 1976. Thereafter, a new firm was constituted by inducting Smt. Seelawati as a partner in place of the deceased partner alongwith the remaining existing partners. All these facts have been stated in the statement of the case. The question, therefore, arose whether on the death of Shankar Dass, the predecessor firm stood dissolved or…

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