- (1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench "B", Delhi, referred the following question for the opinion of this court ; " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the income of the two periods could not he clubbed ?" The reference relates to the assessment year 1977-78. A partnership firm was originally constituted by four partners ; of them, one of the partners, namely, Shankar Dass, died on September 16, 1976. Thereafter, a new firm way constituted by inducting Smt. Seelawati as a partner in place of the deceased partner along with the remaining existing partners. All these facts have been stated in the statement of the case.
(2.) THE question, therefore, arose whether on the death of Shankar Dass, the predecessor firm stood dissolved or that firm continued with a changed constitution. Sri Ashok Kumar, appearing for the Revenue, clearly states at the Bar that there was no clause in the partnership deed containing an agreement to the contrary that the partnership firm will not dissolve despite the death of a partner. Section 188 of the Income-tax Act, 1961, provides that where a firm carrying on a business or profession is succeeded by another firm, and the case is not one covered by Section 187, separate assessments shall be made on the predecessor firm and the successor firm in accordance with the provisions of Section 188. One of the partners having died on September 16, 1976, and there being no agreement to the contrary in the partnership deed that the partnership firm will not dissolve despite the death of a partner, we hold that the predecessor firm stood dissolved on the death of Shankar Dass and a new firm came into being which was constituted by the remaining partners and Smt. Seelawati, a newly introduced partner. It is a case of succession falling under Section 188 of the Income-tax Act and not a case of change in the constitution of the firm, as envisaged in Section 187. We, therefore, agree with the view taken by the Appellate Tribunal that the income of the two periods could not be clubbed.
(3.) FOR the reasons the aforementioned question referred to this court is answered in the affirmative, i.e., against the Revenue and in favour of the assessee.;