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Issues: (i) Whether the death of a partner followed by admission of his widow resulted in dissolution of the firm or merely a change in its constitution. (ii) Whether the firm was entitled to registration for the part of the period after the partner's death despite absence of Forms Nos. 11 and 11A.
Issue (i): Whether the death of a partner followed by admission of his widow resulted in dissolution of the firm or merely a change in its constitution.
Analysis: The governing principle applied was that on the death of a partner, dissolution ordinarily takes place unless there is a contract to the contrary. The earlier view treating such a situation as only a change in constitution under section 187 of the Income-tax Act, 1961 was not accepted. On the facts referred, the admission of the widow after the partner's death supported the conclusion that dissolution had occurred.
Conclusion: The death of the partner brought about dissolution of the firm, and the contrary view was rejected.
Issue (ii): Whether the firm was entitled to registration for the part of the period after the partner's death despite absence of Forms Nos. 11 and 11A.
Analysis: Once dissolution was accepted, the claim for registration for the post-dissolution period could not be negated merely on the footing that the case involved only a continuing firm with a change in constitution. The Tribunal's view that the assessee was entitled to registration for the relevant part of the period was supported on the legal position governing dissolution and subsequent constitution of the business arrangement.
Conclusion: Registration for the relevant part of the period was upheld in favour of the assessee.
Final Conclusion: The reference was answered in favour of the assessee, and the Revenue's challenge failed on both referred questions.
Ratio Decidendi: On the death of a partner, dissolution of a firm ordinarily follows unless there is a contract to the contrary, and the tax treatment must conform to that legal position rather than treating the matter as a mere change in constitution.
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