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TMI Blog1983 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... 30, 1974, and the other for the period December 1, 1974, to March 31, 1975 ?" The assessee, which is a registered firm, filed before the assessing authority two returns, one return of income covering the period from April 1, 1974, to November 30, 1974, and another return for the period from December 1, 1974, to March 31, 1975, contending that two separate assessments should be made for the assessment year 1975-76. This claim was made by the assessee on the ground that there was a dissolution of an earlier firm and thereafter a new firm was constituted. The ITO, however, rejected the claim and made a single assessment for the entire assessment year 1975-76. The ITO took the view that there was only a change in the constitution of the firm, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venkatarama Chettiar are to have represented their respective branches as partner in the said firm. However, on November 30, 1974, there was a partition between the two brothers of the properties belonging to the HUF. On the same day, that is, on November 30, 1974, they executed a deed of dissolution stating that the firm stood dissolved on and from November 30, 1974. The dissolution of the firm had also been intimated to the Registrar of Firms, Salem, since the firm had been registered earlier with him. Thereafter accounts were drawn up for the period April 1, 1974 to November 30, 1974, including a balance-sheet. Thus, as a consequence of the division of the family properties between the two brothers, the firm also has been dissolved. Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the provisions of s. 188 of the Act stood attracted as there was a succession of one firm by another firm and hence two separate assessments have to be made for the assessment year in question in the assessee's case. On a due consideration of the matter, we are inclined to accept as correct the view of the Tribunal in this case. As has been pointed out by this court in Tyresoles (India), Calcutta v. CIT [1963] 49 ITR 515 at p. 529: " The dissolution and reconstitution of a partnership are two different legal concepts. The dissolution puts an end to the partnership but reconstitution keeps it subsisting, though in another form. A dissolution followed by some of the erstwhile partners taking over the assets and liabilities of the diss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Partnership Act, but where the firm is dissolved either, by agreement of the partners or by operation of law and another firm takes over the business, that will be a case of succession governed by s. 188 of the Act, even though some of the partners of the two firms are common. In that case a firm had been constituted by two partners. On the death of one partner, the surviving partner took over other persons as partners and thereafter carried on the partnership business. The question arose whether there was a reconstitution of the old partnership or whether it is a succession of the business by a new entity. The court took the view that as the erstwhile firm stood dissolved by operation of law on the death of the partners, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basic concept underlying s. 187(1) is that one and the same firm must be continuing throughout the year of assessment and even if there is a change in the constitution of the firm, the firm as an entity must continue as one and single throughout the period, and that, therefore, in cases where the firm ceases to exist as contemplated by s. 42 of the Partnership Act, the relationship of the partners inter se comes to an end and thereafter the firm can no longer be said to continue as before. The court further held that once firm is dissolved, it comes to an end and thereafter there cannot be continuity of the firm so as to say that there is a mere change in the constitution of the firm. The same view has also been taken by this court again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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