- (1.) THIS is an income-tax reference under S. 256(1) of the IT Act, 1961. In which following questions have been referred to us for our opinion : "1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in the absence of any provision to the contrary in the instrument of Partnership, a firm automatically came to an end and was dissolved on the death of a partner ? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in any event, where, there was a change in the constitution of a firm, separate assessments have to be made, on in respect of the income derived before re-constitution 'and another in respect of the income derived after re-constitution of the firm ?"
(2.) THE relevant assessment year is 1978-79. During this assessment year one of the partners of the assessee-firm Kailash Chandra Garg died on 4th Aug., 1976. Thereafter the remaining partners executed a fresh partnership deed on 29th July, 1977. In the original partnership deed there is no mention that on the death of a partner the firm will continue in existence. Hence in view of S. 42(c) of the Partnership Act, the firm stood automatically dissolved on the death of the partner. Hence, it is a case of dissolution of the firm and not re-constitution. Hence the two assessments and not one assessment have to be framed in view of the decision of the Supreme Court in CIT vs. Empire Estate (1996) 132 CTR (SC) 221 : (1996) 218 ITR 355 (SC). We, therefore, answer the first question referred to us in the affirmative i.e., in favour of the assessee and against the Department. In view of our answer to the first question we decide the second question by holding that there was dissolution of the firm and not mere change of its constitution and hence the two separate assessments have to be made for the assessment year. The reference is answered accordingly.;