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Issues: (i) Whether the assessee-firm stood dissolved on the death of a partner, or whether the event amounted merely to a change in the constitution of the firm. (ii) Whether, on the facts found, section 187(1) and section 187(2) of the Income-tax Act, 1961 governed the assessment of the firm.
Issue (i): Whether the assessee-firm stood dissolved on the death of a partner, or whether the event amounted merely to a change in the constitution of the firm.
Analysis: The court followed its earlier decisions holding that on the death of a partner the firm stands dissolved and the situation is not treated as a mere change in constitution of the firm.
Conclusion: The firm stood dissolved on the death of the partner and there was no mere change in the constitution of the firm.
Issue (ii): Whether, on the facts found, section 187(1) and section 187(2) of the Income-tax Act, 1961 governed the assessment of the firm.
Analysis: Since the firm was held to have dissolved on the death of the partner, the provisions governing a mere change in constitution had no application to the assessment.
Conclusion: Section 187(1) and section 187(2) of the Income-tax Act, 1961 did not apply to the assessment of the firm.
Final Conclusion: Both referred questions were answered against the Revenue and in favour of the assessee, with the legal consequence that the firm was treated as dissolved on the partner's death and not as a continuing firm with a changed constitution.
Ratio Decidendi: On the death of a partner, the firm is dissolved and the provisions applicable to a mere change in constitution of the firm do not govern its assessment.
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