TMI Blog1996 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... B. V. Satyanarayana, on August 28, 1978, there was dissolution of the firm under section 187(2) of the Income-tax Act and consequently directing two separate assessments for the assessment year 1979-80-one for the period up to the date of death of the partner and the other for the subsequent period ? " The respondent is the assessee. It is a registered firm. In the previous year relevant to the assessment year 1979-80, there were six partners in the firm. Out of them, one partner, Sri B. V. Satyanarayana, died on August 28, 1978. In the partnership deed there was no stipulation that in the event of death of one of the partners, the firm would continue as such. After the death of the said partner, a separate partnership was entered into b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal dismissed the appeal of the Revenue on January 1, 1994. It is from that order of the Tribunal, the abovesaid question has arisen. It will be useful to read here the provisions of sections 187 and 188 of the Income-tax Act, 1961, which are as follows : " 187. Change in constitution of a firm.--(1) Where, at the time of making an assessment under section 143 or section 144 it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment : Provided that-- (i) the income of the previous year shall, for the purposes of inclusion in the total incomes of the partners, be apportioned between the partners who, in such previous year, were en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from April 1, 1975. Before the insertion of the proviso to sub-section (2), the death of a partner was treated as a change and it provided that at the time of making an assessment under section 143 or section 144 if it was found that a change had occurred in the constitution of a firm, the assessment had to be made on the firm as constituted at the time of making the assessment. Sub-section (2) explains as to what constitutes a change in the constitution of the firm for purposes of section 187. It has already been mentioned above that the death of the partner was treated as a change. Section 188 provides how the assessment should be made in cases of succession of one firm by another firm. It says that where a firm carrying on a busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there should be two assessments. It was further held that sub-section (1) of section 187 did not apply to a situation where the firm was dissolved by operation of the one or the other provisions of section 42 of the Indian-Partnership Act and after the dissolution one or more partners continue the same business as before by a fresh agreement with one or more new partners, that when a partner had died and the firm was dissolved though it could be said that he ceased to be a partner, it could not be said that there was a mere change in the constitution of the firm. It was in the light of the judgment of the larger Bench that the Tribunal has held that it cannot be said that the second firm was only a continuation of the old firm with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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