Partnership dissolution on death of a partner required separate income-tax assessments for distinct periods of the year.

On the death of a partner during the previous year, the firm was treated as dissolved rather than as a mere change in constitution under section 187 of the Income-tax Act, 1961. The retrospective proviso to section 187 excluded cases where dissolution occurred on a partner's death from section 187(2)(a), so the post-death partnership constituted a fresh firm. As a result, the assessment had to be split into two separate assessments for the two distinct periods of the year, and the issue was decided in favour of the assessee.

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Issues: Whether, on the death of a partner during the previous year, the firm stood dissolved so as to require two separate assessments for the two periods under the Income-tax Act, 1961.

Analysis: The relevant previous year covered a death of one partner and the constitution of a fresh partnership thereafter. The proviso inserted in section 187, with retrospective effect from 1 April 1975, expressly excluded from section 187(2)(a) cases where the firm is dissolved on the death of a partner. On that legal position, the case could not be treated as a mere change in constitution under section 187, and the assessment had to be split for the two distinct periods of the year.

Conclusion: The question was answered in the affirmative in favour of the assessee; two separate assessments for the two periods were required.

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