Reconstitution of partnership firm on a partner's death requires only one assessment, not two, where continuation is provided in the deed.

Where a partnership deed provides that the firm will continue despite a partner's death, the firm is treated as reconstituted, not dissolved. On that footing, and in light of the binding Full Bench view, only one assessment is required for the relevant assessment year; two separate assessments are not permissible. The distinction between section 184(7) and section 187(2) of the Income-tax Act, 1961 supports that approach, because the death of a partner without a dissolution deed does not create a new assessable firm for the same year.

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Issues: Whether, on the death of a partner where the partnership deed provided for continuance of the firm, the case was one of reconstitution of the firm and, if so, whether one assessment or two assessments were required for the relevant assessment year.

Analysis: The partnership deed expressly provided that the death of a partner would not dissolve the firm, and no deed of dissolution was executed. On those facts, the arrangement amounted to reconstitution of the firm. The earlier view that two assessments were necessary in such a situation had already been overruled by a Full Bench decision, which held that only one assessment was required. The distinction between the language of section 184(7) of the Income-tax Act, 1961 and section 187(2) of the Income-tax Act, 1961 supported adherence to that binding view.

Conclusion: The question was answered in the negative: the assessee was not entitled to two assessments, and only one assessment was exigible.

Final Conclusion: The reference was decided against the assessee and in favour of the Revenue on the assessment treatment of a reconstituted firm after the death of a partner.

Ratio Decidendi: Where the partnership deed provides for continuation of the firm despite the death of a partner, the case is one of reconstitution and not dissolution, and only one assessment is to be made.

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