1989 (12) TMI 139

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..... 3. Previously the firm consisted of four partners. On 5-5-1980, one of the partners, Shri Nanjibhai Shah, died. A new partnership was constituted with effect from 6-5-1980 consisting of two out of the three remaining partners of the old firm, and four new partners. The I.T.O. took the line that the case was one of the change in the constitution of the firm and in this view of the matter made a single assessment clubbing together the income returned for the two periods. 4. On his part, the C.I.T. (Appeals) directed the I.T.O. to make two separate assessments. In this regard, he was impelled by the retrospective amendment to section 187(2) made by the Taxation Laws (Amendment) Act, 1984 whereby a proviso is deemed to have been added righ .....

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..... regoing, therefore, contended Shri Nair that the I.T.O. was justified in making a single assessment treating the case as one of change in the constitution of the firm. 9. On his part, Shri R.M. Shah, the learned Counsel for the assessee, contended that as provided in sections 40 to 43 of the Partnership Act, death of a partner resulted in dissolution of the firm. Further, he contended that after the death of Nanjibhai Shah, one of the remaining partners gave notice of dissolution and accordingly, the firm was dissolved and the accounts made up and settled. It was, thereafter, the new firm was constituted. He, therefore, urged that the impugned order of the C.I.T. (Appeals) does not invite any interference. In this connection, he contended .....

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..... f its partners of the firm, a firm is dissolved by operation of law in a case where the provisions of section 42 of the Indian Partnership Act apply. Even here, it must be highlighted that the provisions of section 42 are "subject to contract between the partners." In other words, where a partnership deed is silent on the fate of the firm on the death of any of its partners, section 42(c) of the Indian Partnership Act would get activated and consequently the firm will stand dissolved on the death of the partner. Where, however, as in the case before us, the partnership deed contains a specific provision to the effect that the death of any of its partners of the firm shall not result in dissolution of the firm, section 42(c) is totally inapp .....

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