Court rules Revenue wins under Income-tax Act section 187(1), appeal allowed, Tribunal decisions unjustified. Each party bears own costs.

The court ruled in favor of the Revenue, holding that the case fell under section 187(1) of the Income-tax Act. The court allowed the appeal, stating that the Tribunal's decisions on separate assessments and depreciation were not justified. The parties were directed to bear their own costs.

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Issues:
1. Whether separate assessments should be made for different periods due to a change in the firm's constitutionRs.
2. Whether the addition of a specific amount should be deleted in the hands of a new firmRs.
3. Whether depreciation should be allowed for both periods due to a firm's dissolutionRs.

Analysis:

Issue 1:
The case involved a firm with 13 partners engaged in manufacturing. Two partners retired, and two new partners joined, leading to a new partnership deed. The Assessing Officer made a single assessment for the year, considering it a change in constitution, but the Tribunal directed two separate assessments. The court analyzed the provisions of section 187(1) of the Income-tax Act, which define a change in the firm's constitution. The court held that the deed of dissolution did not change the fact that it was a reconstitution, not a succession. Citing relevant case law, the court concluded that the Tribunal was not justified in ordering separate assessments.

Issue 2:
Regarding the addition of Rs. 2,00,155, the Tribunal deleted it, stating it was paid by the dissolved firm. The court disagreed, emphasizing that the firm's reconstitution under section 187(1) meant no separate assessments were warranted. The court held that the addition should not have been deleted, as it was a case covered by the Act.

Issue 3:
The Tribunal allowed depreciation for both periods, considering it a case of firm dissolution. However, the court found that as per section 187(1), it was a reconstitution, not dissolution, and thus, depreciation could not be allowed for both periods. The court emphasized that the Tribunal's decision to allow depreciation for both periods was incorrect.

In conclusion, the court ruled in favor of the Revenue, stating that the case fell under section 187(1) of the Act. The court allowed the appeal, holding that the Tribunal's decisions on separate assessments and depreciation were not justified. The parties were directed to bear their own costs.

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