2002 (12) TMI 35 - HC - Income Tax

Court affirms Tribunal's ruling on firm reconstitution for income tax, allowing one assessment.

The High Court of Allahabad upheld the Tribunal's decision in favor of the Department and against the assessee in an income-tax reference case concerning ... Reconstitution of the firm OR dissolution of firm – assessment - '1. Whether, the Tribunal was correct in law in holding that the incomes of the two periods could not be clubbed? - 2. Whether the Department's view that there was only a change in the constitution of the firm and that only one single assessment was justified in view of the provisions of section 187(1), is correct in law?' - It is not disputed that the three partners were common. Both the minors who were admitted to the benefits of partnership were dropped and five new partners were taken into partnership in view of section 187(2)(a) this is a case of reconstitution of the firm and not of its dissolution. As such only one assessment has to be made for the assessment year. In view of this both the first question is answered in the negative and the second is answered in the affirmative, that is, both the questions are answered in favour of the Department and against the assessee The High Court of Allahabad ruled on an income-tax reference regarding the reconstitution of a firm for the assessment year 1976-77. The court held that there was a change in the firm's constitution, not dissolution, and only one assessment was justified under section 187(1) of the Income-tax Act, 1961. The Tribunal's decision was upheld in favor of the Department and against the assessee.