Partnership succession on death of partner requires separate assessments when no continuance clause exists.

On the death of a partner, where the partnership deed contains no clause for continuance of the firm, the firm is treated as dissolved and a new firm comes into existence with the surviving and newly inducted partners. In that situation, the case falls within succession of one firm by another under section 188 of the Income-tax Act, 1961, rather than a mere change in constitution under section 187. The income of the two periods cannot be clubbed, and separate assessments are required.

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Issues: Whether, on the death of a partner and in the absence of any agreement to the contrary, the firm stood dissolved so that the case fell under succession of a firm requiring separate assessments under section 188 of the Income-tax Act, 1961, or whether it was only a change in the constitution of the firm under section 187, permitting clubbing of the income of the two periods.

Analysis: The partnership deed contained no stipulation that the firm would continue despite the death of a partner. On the death of one partner, the predecessor firm came to an end and a new firm was constituted by the surviving partners along with the newly inducted partner. The statutory scheme distinguishes succession of one firm by another, attracting separate assessments, from a mere change in constitution. On these facts, the case was one of succession falling under section 188 and not a case of change in constitution under section 187.

Conclusion: The income of the two periods could not be clubbed, and the question was answered in the affirmative, against the Revenue and in favour of the assessee.

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