JUDGMENT
1. Under Section 256(1) of the Income-tax Act, 1961, the Tribunal has stated the following three questions :
“(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the firm
got automatically dissolved on the death of Shri Phool Chandra, partner, and, thereafter, the business was carried on by a new firm consisting of the remaining three partners ?
(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in not accepting the contention of the Department that it was a case of a mere change in constitution of the firm within the meaning of Section 187(2) of the Income-tax Act, 1961, and that the Income-tax Officer was justified in making one single assessment after clubbing the income of both the periods ?
(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that two separate assessments should be made on the basis of the two returns filed by the assessee before the Income-tax Officer ?”
2. The assessee is a partnership firm. For the assessment year 1974-75, the assessee filed two returns of income, both in the name of Messrs. Porwal and Co. one in respect of the period April 10, 1973, to July 1, 1973, and the other from July 1, 1973, to March 31, 1974. The assessee claimed that one of the partners, Shri Phool Chandra, died on June 27, 1973, and that, thereafter, a fresh partnership deed was executed between the remaining three partners ort July 1, 1973. They also pointed out that the first partnership deed did not contain a clause that death shall not operate as dissolution, nor did it provide for the heir or successor of the deceased partner being inducted in place of the deceased partner. The facts stated by the assessee were found to be correct. Even so the Income-tax Officer held that it was a case of reconstitution of the firm and made one assessment. On appeal, the Appellate Assistant Commissioner agreed with the assessee that it was a case of succession of one firm by another and allowed the appeal. The Department carried the matter to the Appellate Tribunal in appeal which too was dismissed, agreeing with the opinion expressed by the Appellate Assistant Commissioner.
3. Once there is no clause in the partnership deed that death shall not result in dissolution, the death of a partner does result in dissolution. In this case, it appears that the partnership deed specifically stated that the duration of the business will be ‘at will’. Moreover, after the death of one of the partners, a new partnership deed was also executed by the remaining three partners. In such a situation, the Tribunal was right in holding that it was not a case of reconstitution but succession.
4. For the above reasons, the questions referred are answered in the affirmative, i.e., in favour of the assessee and against the Revenue. No order as to costs.