Succession of firm versus change in constitution: dissolution and fresh partnership meant section 188 applied, not section 187.

A partnership that had first become a proprietary concern of one partner and later reconstituted as a fresh partnership was treated as a succession, not a mere change in constitution. On the partnership deed and dissolution deed, the earlier firm was held to have come to an end, so the conditions for applying section 187 of the Income-tax Act were not met. The assessment therefore proceeded on the basis of succession under section 188, and the Revenue's challenge failed.

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Issues: Whether the assessment for the relevant period was to be made on the basis of a change in the constitution of the firm under section 187 of the Income-tax Act, 1961, or as a succession under section 188 of that Act.

Analysis: On the partnership deed and dissolution deed, the business was found to have become the proprietary concern of one partner for a short period after 30 June 1980 and thereafter to have come into existence as a new partnership from 1 July 1980. The factual position showed that the earlier firm had come to an end and a new partnership had been constituted, so the conditions for applying section 187 were not satisfied.

Conclusion: The matter fell under succession and not a mere change in constitution; the assessment on that basis was upheld, and the Revenue's challenge failed.

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