Dissolution on retirement of one partner in a two-partner firm justified separate assessments and raised no referable question of law.

Retirement of one partner from a two-partner firm was treated as dissolution rather than mere reconstitution, so the firm's income had to be assessed separately for the two accounting periods. The legal principle applied was that when a partnership of only two persons ends on one partner's exit, no surviving partnership remains for a single continuing assessment. On that settled basis, the Tribunal's view was upheld as governed by existing law, and no fresh referable question of law arose under the reference provision.

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Issues: Whether, on the retirement of one of two partners, the case amounted to dissolution of the firm warranting separate assessments for the two periods, and whether any referable question of law arose for reference under section 256(1) of the Income-tax Act, 1961.

Analysis: The firm had only two partners, and one retired during the accounting period. The Tribunal treated the event as dissolution of the firm and held that the two periods had to be assessed separately. The reference court applied the Supreme Court principle that where a partnership of two persons comes to an end on the exit of one partner, there is no surviving partnership that can continue as a reconstituted firm for the purpose of a single assessment. On that basis, the conclusion of the Tribunal was held to be controlled by settled law and not to give rise to a fresh question of law.

Conclusion: The retirement of one partner in a two-partner firm was treated as dissolution rather than mere reconstitution, separate assessments were justified, and no referable question of law arose.

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