TaxTMI 
TaxTMI 
1993 (8) TMI 4
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....ax Officer was not justified in making a single assessment of the firm instead of two assessments, one for the period up to January 16, 1977, and the other from the period January 17, 1977, onwards ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the provisions of section 188 are applicable in the case of the assessee and not the provisions of section 187, as done by the Income-tax Officer ? " The facts relevant to the decision of the aforesaid questions are that the assessee-firm, as originally constituted, consisted of three partners, namely, Ram Bharoseylal, Harishchand and Smt. Ram Kunwar Devi. One of the partners, i.e., Ram Bharoseylal, died on January 16, 1977. Thereaft....
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....f a firm. --- (1) Where at the time of making an assessment under section 143 or section 144 it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment : Provided that --- (i) the income of the previous year shall, for the purpose of inclusion in the total incomes of the partners, be apportioned between the partners who, in such previous year, were entitled to receive the same ; and (ii) when the tax assessed upon a partner cannot be recovered from him, it shall be recovered from the firm as constituted at the time of making the assessment. (2) For the purposes of this section, there is a change in the constitution of the firm....
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.... The effect of this proviso was considered by this court in CIT v. Kheta Sons and Co. [1986] 162 ITR 833 and it was held that the aforesaid amendment has changed the law with retrospective effect and, therefore, the Full Bench judgment in Girdharilal's case [1984] 147 ITR 529, would not apply to cases where the partnership stands dissolved on the death of any one of its partners after April 1, 1975. The relevant portion from the aforesaid judgment is as under (page 835) : " Section 187(2) as it stood prior to this amendment was inter preted along with section 188 of the Act by a Full Bench of this court in Girdharilal Nannelal v. CIT [1984] 147 ITR 529, to mean that it indicates where one or more of the partners of the old firm continue ....
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....ded by virtue of the proviso to sub-section (2) of section 187." In view of the aforesaid, it is clear that in all cases where partnership stands dissolved by the death of a partner, section 187(2) would not apply and the proper section would be section 188 of the Act. Applying the aforesaid law to the facts of the present case, one of the partners of the firm died on January 16, 1977, and the firm was reconstituted by taking two new partners from January 17, 1977. It is, therefore, a case where the proviso added by the amending Act of 1984 will apply and the case would be governed by section 188 and not section 187 of the Act. It appears that the order of the Tribunal was passed before the amendment and the Tribunal has come to this ....