1997 (7) TMI 668 - HC - Income Tax

Summary

Issues:
1. Whether two separate assessments should be made for two different periods due to a change in the firm's constitution.
2. Whether the firm was dissolved on the death of a partner, leading to the need for separate assessments.
3. Whether full depreciation should be allowed to the firm for the second period.

Analysis:

1. The first and second questions revolve around whether one assessment or two assessments should be made for two different periods due to a change in the firm's constitution. The firm had partners, and upon the death of one partner, new partners were admitted. The assessing authority made one assessment for the entire period, considering it a change in the firm's constitution. However, the AAC and the Tribunal held it was a case of succession, not a change in the constitution, requiring two assessments. The Supreme Court precedent was cited, stating that without an agreement, the firm dissolves upon the death of a partner. The Tribunal's decision was upheld in favor of the assessee.

2. The third question pertains to the allowance of full depreciation to the firm for the second period. The AAC found that full depreciation should be allowed to the firm for the second period as claimed, as no claim for depreciation was made in the return for the first period. The AAC's decision was supported by the Tribunal, stating that depreciation cannot be apportioned between two entities. The High Court found no legal flaw in the AAC's decision and affirmed it in favor of the assessee.

In conclusion, the High Court decided in favor of the assessee on all three questions. The first and second questions were resolved in favor of two separate assessments due to the dissolution of the firm upon the death of a partner. The third question was decided in favor of allowing full depreciation to the firm for the second period, as claimed, without apportioning it between the two periods.