Partnership reconstitution under income-tax law does not necessarily require separate assessments when the firm's constitution changes mid-year.

A partnership firm that changed its constitution during the previous year, after one partner retired and a fresh deed was executed, raised the issue whether the change amounted to mere reconstitution or a succession requiring separate assessments. Applying the Full Bench view and section 187(2) of the Income-tax Act, 1961, the change was treated as reconstitution rather than a case warranting two independent assessments for the pre- and post-change periods. The Tribunal's approach to separate assessments was therefore not accepted, and the Revenue's position prevailed.

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Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that two assessments should have been made for the periods before and after the change in the constitution of the firm.

Analysis: The assessee was a partnership firm whose constitution changed during the previous year when one partner retired and a fresh partnership deed was executed with effect from the following day. The question was whether the change amounted to a mere reconstitution requiring one assessment for the whole year, or a succession requiring two separate assessments. In view of the Full Bench decision overruling the earlier contrary view and the mandate of section 187(2) of the Income-tax Act, 1961, the change was treated as a case not warranting two separate assessments on the basis accepted by the Tribunal.

Conclusion: The question was answered in the negative, in favour of the Revenue and against the assessee.

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