- (1.) This is a reference of the Commissioner of Income-tax, Agra, under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and relates to the assessment year 1977-78.
(2.) The question for determination is whether Section 187 has any application to the case of a firm, where on the death of one of its partners, it is dissolved and the business of that firm is taken over by a new firm in which one or more partners of the dissolved firm are also partners, that is to say, there are some partners who are common between the erstwhile firm and the new firm.
(3.) The brief facts are that the respondent-assessee-firm, B. M. Jain and Co., was constituted under a deed of partnership dated April 1, 1971, with three partners. One of the partners, Bengali Mal Jain, died on December 26, 1976, during the previous year relevant to the assessment year in question. The surviving partners, along with four others, constituted a new firm with effect from December 27, 1976, and a new partnership deed was drawn up on January 7, 1977. The new firm took over the business of the erstwhile firm. For the assessment year in question, two returns were filed, claiming two separate assessments. In the first return, an income of Rs. 75,940 was disclosed for the period April 1, 1976 to December 26, 1976, and for that period, continuation of registration was claimed on the strength of a declaration under Section 184(7) in form No. 12, which was filed on May 11, 1977. In the second return, an income of Rs. 62,612 was disclosed for the period December 27, 1976 to March 31, 1977, i.e., for the remaining period of the previous year after the business was taken over by the new firm. For this period, the assessee claimed registration on the basis of the fresh deed of partnership mentioned earlier.;