1984 (10) TMI 17 - HC - Income Tax

Summary

Issues:
- Interpretation of section 187(2)(a) of the Income-tax Act, 1961 regarding single assessment on aggregate income for two periods.
- Determination of whether there was a dissolution of a partnership on the death of a partner.
- Consideration of subsequent conduct of partners in relation to partnership continuation.

Analysis:
The case involved a partnership with eleven partners, one of whom died, leading to the filing of two separate income tax returns for different periods. The Income-tax Officer made a single assessment on the total income, which the assessee contested, claiming dissolution of the partnership upon the partner's death. The Appellate Assistant Commissioner upheld the assessment, but the Appellate Tribunal ruled in favor of the assessee, directing separate assessments for the two partnerships.

The Revenue argued that subsequent partnership deeds indicated an agreement to continue the partnership despite a partner's death. However, the court found that the conduct of the parties did not support this argument. The court noted the closure of accounts upon the partner's death, separate profit calculations for the two periods, and the filing of two separate tax returns as evidence of dissolution and creation of a new partnership.

The court rejected the Revenue's argument that section 187(2) applied, citing a previous court decision and an amendment to the Income-tax Act. The court concluded that a single assessment on the aggregate income for the two periods was not permissible. The question was answered in favor of the assessee.