Retrospective amendment on firm dissolution confirmed separate income-tax assessments after a partner's death.

A retrospective amendment to the proviso to section 187(2) of the Income-tax Act altered the position for assessment year 1976-77, so the section did not apply on the facts found. As a result, the death of a partner dissolved the old firm, and the business continued under a fresh partnership as a new firm for assessment purposes. Separate assessments were therefore required for the pre-death and post-death periods, and the reference was answered in favour of the assessee.

---

---

Issues: Whether, on the death of one partner, the firm stood dissolved so as to require separate assessments for the pre-death and post-death periods, or whether the case fell within a mere change in the constitution of the firm under section 187(2) of the Income-tax Act, 1961.

Analysis: The assessment year involved was 1976-77. The proviso to section 187(2) had been inserted by section 33 of the Taxation Laws (Amendment) Act, 1984 with retrospective effect from 1 April 1975. In view of that retrospective amendment, the statutory position applicable to the assessment year in question excluded the operation of section 187 on the facts found. The death of the partner therefore resulted in dissolution of the old firm, and the business thereafter carried on under a fresh partnership constituted a new firm for assessment purposes.

Conclusion: The answer to the referred question is in favour of the assessee. Separate assessments were rightly required for the period up to the date of death and for the subsequent period.

Ratio Decidendi: Where a retrospective amendment makes section 187 inapplicable on the facts, the death of a partner brings about dissolution of the old firm and requires separate assessments for the distinct assessment periods.

---