Distinct firm constitution requires separate income-tax assessments where dissolution and reconstitution are separated by a clear gap.

A gap between the retirement of three original partners and the formation of a new firm with a different constitution showed two distinct firms, not a mere change in constitution under section 187 of the Income-tax Act, 1961. On those facts, the first firm ceased on retirement of the partners and the second firm came into existence later, so the two periods had to be assessed separately. A single assessment for both periods was therefore not justified, and separate assessments were required.

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Issues: Whether the case involved a mere change in the constitution of the firm or the existence of two distinct firms requiring separate assessments for the two periods.

Analysis: The relevant facts showed that three of the four original partners retired on 25 July 1972 and a new firm came into existence on 26 July 1972 with a different constitution. There was a clear gap between the dissolution of the first firm and the formation of the second. On these facts, the matter did not fall within the scope of section 187 of the Income-tax Act, 1961, which deals with a change in the constitution of a firm, but disclosed two separate firms for two different periods.

Conclusion: The Tribunal was right in holding that two separate assessments were required and the single assessment made by the departmental authorities was not justified.

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