Succession on partnership dissolution governs tax assessment where one partner continues the same business after dissolution.

On dissolution of a partnership, where one partner continues the same business, the arrangement amounts to a succession of the business for income-tax purposes under Section 26(2) of the Indian Income-tax Act, 1922. A partnership firm is treated as a separate assessable entity from its partners, so the continuing partner is assessed in the new capacity of successor rather than as a mere co-owner. Section 44 applies only where the business has been discontinued and does not govern a case of continuous business carried on after dissolution. The assessment was therefore treated under Section 26(2), with the continuing partner liable on the ex-partner's share of profits.

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Issues: Whether a partner who continues the business after dissolution succeeds to the business within the meaning of Section 26(2) of the Indian Income-tax Act, 1922, and whether Section 44 applies when the business is continued without discontinuance.

Analysis: A partnership firm is treated as a separate assessable entity distinct from the partners who compose it. When one partner continues the same business after dissolution, there is succession to the business within Section 26(2), because the continuing partner does not remain merely a part-owner but takes over the business in a new capacity for assessment purposes. Section 44 has no application unless the business has been discontinued; it does not govern a case where the business is carried on continuously by one partner after dissolution.

Conclusion: The case falls under Section 26(2) and not Section 44, and the assessee is liable to be assessed on the ex-partner's share of the profits.

Final Conclusion: The reference was answered in favour of the Revenue, affirming assessment of the continuing partner under the successor-provision of the Act.

Ratio Decidendi: On dissolution of a partnership, if one partner continues the same business, the firm is succeeded for income-tax purposes and the continuing partner is assessable as the successor; Section 44 applies only upon discontinuance of the business.

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