Partnership reconstitution and registration renewal: original firm may qualify for the pre-reconstitution period, but not for the later entity.

Where a partnership firm is reconstituted during the accounting year, the original firm and the reconstituted firm are treated as separate assessable entities. Renewal of registration cannot be claimed by the post-reconstitution firm on the basis of the original partnership deed without a fresh instrument, so the claim for the full assessment year failed. However, the original firm was entitled to renewal for the period up to the partner's death, because it continued to exist and carry on business during that period and had otherwise satisfied the statutory requirements. Renewal is not denied merely because the firm existed only for part of the year.

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Issues: (i) Whether the assessee-firm was entitled to renewal of registration for the assessment year 1960-61 on the basis of the original partnership deed after the death of a partner and admission of a minor to the benefits of partnership without a fresh deed; (ii) whether, in the alternative, renewal of registration could be allowed for the period up to the death of the partner on 20 December 1958.

Issue (i): Whether the assessee-firm was entitled to renewal of registration for the assessment year 1960-61 on the basis of the original partnership deed after the death of a partner and admission of a minor to the benefits of partnership without a fresh deed.

Analysis: On reconstitution, the firm becomes a distinct assessable entity from the firm as originally constituted. The original firm and the reconstituted firm are separately liable to assessment for the respective periods during which each existed, and the mere fact that the constitution changed during the accounting year does not by itself defeat renewal for the original firm. However, the reconstituted firm could not claim renewal on the basis of the original instrument for the post-reconstitution period.

Conclusion: The answer to this issue is against the assessee and in favour of the department.

Issue (ii): Whether, in the alternative, renewal of registration could be allowed for the period up to the death of the partner on 20 December 1958.

Analysis: The erstwhile firm continued to exist and carry on business until the date of the partner's death, and it had already been enjoying renewal of registration on the same partnership deed. A firm that exists only for part of the accounting year is not denied renewal merely because it did not last the whole year, so long as it satisfied the statutory requirements for the period of its existence.

Conclusion: The answer to this issue is in favour of the assessee and against the department.

Final Conclusion: The reference was answered partly against the assessee and partly in its favour, with the first question rejected and the alternative claim accepted for the pre-reconstitution period.

Ratio Decidendi: Where a firm is reconstituted during the accounting year, the original firm and the reconstituted firm are separate assessable entities, and renewal of registration may be granted for the period during which the original firm actually existed if the statutory requirements are otherwise satisfied.

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