Death of a partner caused firm dissolution, so succession applied and separate income-tax assessments were required.

On the death of a partner, and absent any contract to the contrary, the firm was treated as dissolved under the Partnership Act's default rule. The retrospective proviso to section 187(2) of the Income-tax Act also supported the view that the matter was one of succession, not a mere change in the firm's constitution. The result was that section 188 applied, requiring separate assessments for the predecessor and successor firms rather than a single assessment under section 187.

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Issues: Whether, on the death of a partner, the firm stood dissolved so that the case was one of succession under section 188 of the Income-tax Act, 1961, and not a mere change in the constitution of the firm under section 187 of that Act.

Analysis: The relevant assessment year was 1978-79 and one of the partners died during the accounting period. There was no contract to the contrary to displace the normal rule that a firm dissolves on the death of a partner under section 42 of the Partnership Act, 1932. The proviso inserted in section 187(2) of the Income-tax Act, 1961, with retrospective effect from 1 April 1975, also supported the conclusion that the case fell within succession rather than a mere change in constitution.

Conclusion: The reference was answered in favour of the assessee by holding that the firm was dissolved on the partner's death and that two separate assessments were required under section 188 of the Income-tax Act, 1961.

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