Succession under the Income-tax Act required separate assessments before and after a partner's death in a firm.

A partnership firm's dissolution on the death of a partner and the need for separate assessments before and after death were examined under sections 187 and 188 of the Income-tax Act, 1961. Applying the retrospective proviso inserted to section 187(2) by the Taxation Laws (Amendment) Act, 1984, the facts fell outside section 187 and constituted succession under section 188. The firm's business was therefore required to be assessed separately for the two periods within the year, before and after the partner's death.

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Issues: Whether the firm stood dissolved on the death of a partner and whether two separate assessments were required for the periods before and after the date of death.

Analysis: The reference arose under section 256(1) of the Income-tax Act, 1961, for the assessment year 1979-80. The case was governed by sections 187 and 188 of the Act as modified by the retrospective insertion of the proviso to section 187(2) by the Taxation Laws (Amendment) Act, 1984. On the facts found, the proviso excluded the application of section 187, and the situation was one of succession falling under section 188. In such a case, the firm's business had to be assessed separately for the two periods during the year.

Conclusion: The issue was answered in favour of the assessee and against the Revenue. The Tribunal was right in holding that the matter was governed by section 188 and that two separate assessments were required.

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