Death of a partner dissolves the firm absent contrary contract; successor concern is a new firm for assessment purposes.

In the absence of an express or clearly implied contract to the contrary, the death of a partner dissolves a firm under section 42(c) of the Indian Partnership Act, 1932. Here, the partnership deed contained no continuance clause, the later deed did not show continuation of the old firm, and merely carrying on business in the same name and premises was insufficient to prove an implied agreement against dissolution. The closing of the old books and the gap before the new concern began supported the view that the old firm had ceased to exist. The successor concern was therefore a new firm, and separate assessments were required for the two periods.

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Issues: Whether the death of a partner brought about dissolution of the firm so as to require separate assessments for the two periods, or whether the case was merely one of change in the constitution of the firm.

Analysis: The partnership deed contained no clause for continuance of the firm after the death of a partner. On the contrary, clause 17 made the partners subject to the provisions of the Indian Partnership Act, 1932 in matters not expressly provided for. Under section 42(c) of the Indian Partnership Act, 1932 a firm is dissolved by the death of a partner, unless there is a contract to the contrary. The later deed of 14 June 1976 also did not show that the old firm was being continued as such, and the conduct of carrying on business in the same name and premises was insufficient to prove an implied agreement against dissolution. The distinction drawn in the cited precedent applied only where the deeds and conduct disclosed an intention that death would not dissolve the firm. The closing of the old books and the gap before the new firm came into existence supported the conclusion that the old firm had ceased to exist before the new firm was formed.

Conclusion: The death of the partner dissolved the old firm, the later firm was a new entity, and separate assessments were required for the two periods. The finding was against the Revenue and in favour of the assessee.

Final Conclusion: The departmental appeal failed because the earlier firm stood dissolved on the partner's death and the later concern could not be treated as a mere reconstituted firm for a single assessment.

Ratio Decidendi: In the absence of an express or clearly implied contract to the contrary, the death of a partner dissolves the firm under section 42(c) of the Indian Partnership Act, 1932, and the successor concern formed thereafter is a new firm for assessment purposes.

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