Dissolution on death of a partner takes a firm outside Section 187 and requires separate income-tax assessments.

Where a firm is dissolved on the death of a partner, the proviso retrospectively inserted in Section 187(2) of the Income-tax Act excludes the case from the rule treating a mere change in constitution. On the admitted facts, the old firm stood dissolved and a new firm came into existence, so Section 187 did not apply and the matter was one of succession. Separate assessments were therefore required for the two periods, and the Tribunal's view to that effect was upheld.

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Issues: Whether, on the death of a partner, the firm stood dissolved so that the case fell outside the rule of a mere change in the constitution of the firm and attracted succession requiring separate assessments.

Analysis: The relevant assessment year was governed by the proviso inserted retrospectively in Section 187(2) of the Income-tax Act, 1961. That proviso excludes the operation of clause (a) of sub-section (2) where the firm is dissolved on the death of any of its partners. On the admitted facts, the death of one partner brought about dissolution of the old firm and the constitution of a new firm thereafter. In such a situation, Section 187 did not apply and the case was one of succession.

Conclusion: The Tribunal was correct in holding that the old firm stood dissolved on the death of the partner and that separate assessments were required for the two periods; the question was answered in favour of the assessee and against the Revenue.

Final Conclusion: Death of a partner causing dissolution of the firm takes the case out of Section 187 and places it within the rule of succession, warranting separate assessments for the relevant periods.

Ratio Decidendi: Where a firm is dissolved on the death of a partner, the statutory exception to Section 187(2) applies, and the matter is governed by succession rather than a mere change in constitution.

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