1974 (9) TMI 7

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..... le firm. At the time of assessment it was claimed that two assessments should be made, one against the erstwhile firm for the period ending 22nd March, 1964, and the other against the assessee-firm for the period 23rd March, 1964, to the end of the relevant previous year, on the ground that on the death of one of the partners the firm had dissolved and the assessee-firm, which had taken over the business of the erstwhile firm was a successor and, as such, section 188 of the Income-tax Act was applicable. The Income-tax Officer as also the Appellate Assistant Commissioner of Income-tax did not accept this contention holding that, since there were common partners in the two firms, section 187 was applicable so that it was a case of reconstitu .....

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..... on the death of a partner. It is true that whether a firm has been dissolved or not is a question of fact and the fact that the partnership deed does not contain a stipulation that on the death of a partner the firm will not dissolve is not conclusive. It may be possible to prove from the subsequent conduct of the partners or from a collateral agreement that the partners did not intend to dissolve the firm on the death of a partner, but such a finding can be arrived at on the basis of the material on the record. There is no such finding in the instant case. Indeed, the material on the record militates against such a finding. It has been found that two sets of accounts were maintained, one up to the date of the death of the partner, i.e., M .....

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..... or partners after the change. Further, while making assessment under section 189 of the Act the income of the erstwhile firm is to be assessed separately in the hands of the reconstituted firm and it is not to be clubbed with the income of the reconstituted firm earned during the year relevant to the assessment year in question. In the instant case one of the partners of the firm died on 22nd March, 1964. The remaining partners drew up a new partnership deed on 23rd March, 1964, and then carried on the business of the erstwhile firm. In my opinion, the case is squarely covered by section 187 of the Income-tax Act 1961. Accordingly, I answer the question referred to us as follows: "On the facts and in the circumstances of the case, the Tr .....

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