Partnership dissolution on partner's death excludes change in constitution treatment under income-tax law, favouring separate assessments.

On the death of a partner, the firms were treated as dissolved, so separate assessments were required and section 187(2)(a) could not be applied as a mere change in constitution. The retrospective proviso inserted by the Taxation Laws (Amendment) Act, 1984, effective from 1 April 1975, excluded clause (a) where dissolution followed the death of a partner. As the relevant firms stood dissolved on that event, the assessments had to proceed on dissolution rather than as a continuation of the old firm, and the reference was answered against the Revenue.

---

---

Issues: Whether, on the death of a partner, the firms stood dissolved so as to require separate assessments, or whether the case fell within section 187(2)(a) of the Income-tax Act, 1961 as a mere change in the constitution of the firms.

Analysis: The question had to be answered in the light of the proviso inserted retrospectively by the Taxation Laws (Amendment) Act, 1984, with effect from 1 April 1975, which excluded the operation of clause (a) where the firm is dissolved on the death of any partner. Since the relevant firms were dissolved on the death of one partner, the deeming provision treating the matter as a mere change in constitution did not apply. The assessments therefore had to proceed on the basis of dissolution and not as a continuation of the old firm.

Conclusion: The question referred was answered in the affirmative, against the Revenue and in favour of the assessee.

---