Partnership dissolution on partner's death permits separate income-tax assessments where the deed lacks a continuance clause.

Where a partnership deed does not contain a clause preserving the firm on the death of a partner, the firm dissolves by operation of law under section 42 of the Partnership Act. The later business arrangement is treated as a fresh firm or succession, not a mere reconstitution within section 187(2) of the Income-tax Act, 1961. On that basis, a single assessment for both accounting periods was not justified and separate assessments were required for the dissolved firm and the new firm, with the issue resolved in favour of the assessee.

---

---

Issues: Whether the death of a partner, in the absence of a partnership clause providing for continuance of the firm, resulted in dissolution of the firm and justified separate assessments for the two accounting periods rather than a single assessment.

Analysis: The Tribunal had held that the case was not one of reconstitution within the meaning of section 187(2) of the Income-tax Act, 1961. The governing principle applied was that where the partnership deed does not contain a term excluding dissolution on the death of a partner, the firm stands dissolved by operation of law under section 42 of the Partnership Act, and the later business arrangement constitutes a fresh firm or succession rather than a mere reconstitution.

Conclusion: The single assessment was not justified. The matter was correctly treated as involving dissolution of the old firm and the emergence of a new firm, warranting separate assessments; the answer was in favour of the assessee.

---