Reconstitution of partnership firm after partner retirement bars split assessments where business continues under a fresh deed.

Retirement of one partner and execution of a fresh partnership deed did not dissolve the firm where the business continued with the remaining and new partners; the arrangement amounted to reconstitution. On that basis, the accounting period was not split into two separate assessments. The text also notes that the Income-tax Act, as a special law, prevails over the general principles of the Partnership Act in this context.

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Issues: Whether retirement of one of two partners and execution of a fresh partnership deed resulted in dissolution of the firm or merely reconstitution, and whether the accounting period required two separate assessments.

Analysis: The firm was originally constituted by two partners. On the retirement of one partner, the remaining partner joined with new partners under a fresh deed. The governing provision treated such a situation as reconstitution where the business continued and there was no legal basis to split the previous accounting period into two separate assessments. The Court also noted that the Income-tax Act is a special law and its scheme prevails over the general principles of the Partnership Act.

Conclusion: The firm was not dissolved on the retirement of one partner; it was reconstituted. The question was answered in the negative, in favour of the Department and against the assessee.

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