Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Change in constitution of - Assessment year 1976-77 - Whether when two minors who were admitted to benefit of partnership were dropped and five new partners were taken in, it was case of reconstitution of firm and not of its dissolution in view of provisions of section 187(2)(a) and as such only one assessment had to be made for assessment year in question - Held, yes Bharat Ji Agrawal and A.N. Mahajan for the Applicant. ORDER 1. Sri Bharat Ji Agrawal and Sri A.N. Mahajan appeared for the department. Assessee has been served notice but none has appeared. 2. This is an Income-tax reference under section 256(2) of the Income-tax Act, 1961 (the Act) in pursuance of direction of the High Court. Following questions have been referred to us for our opinion : "1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the incomes of the two periods could not be clubbed ? 2. Whether on the facts and in the circumstances of the case, the Department's view that there was only a change in the constitution of the first and that only one single assessment was justified in view of the provisions of section 187(1) of the Income-tax Act, 1961 is correct in law ?" 3. The assessee is a firm and the relevant assessment year is 1976-77. The firm consisted of three partners and two minors were admitted to the benefits of partnership. After 17-12-1975 the both minors were dropped and five new partners were taken into the partnership. The question whether there was dissolution or mere reconstitution of the firm has to be answered in light of section 187 of the Act. It is as follows: "Change in constitution of a firm.-(1) Where at the…

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