The provisions of section 187 of the Income-tax Act, 1961, do not introduce any change in the relationship between the partners and do not introduce a change from the general law of partnership as laid down by the Indian Partnership Act.

JUDGMENT :

B. J. Divan, J.

The assessment year under consideration is 1968-69. The assessee is a registered firm and for the year of account which was the relevant previous year, being Samvat year 2023, the assessee had filed two returns of income for assessment year 1968-69. The first return was for the period November 13, 1966, to May 25, 1967 and the second return was for the period May 26, 1967, to November 2, 1967, Samvat year 2023 was from November 13, 1966, to November 2, 1967. The original partnership deed was dated April 29, 1960, and under that deed of partnership, the firm consisted of four partners, each partner having 25 per cent. share in the profits of the firm. The firm was carrying on business in iron and steel, hardware and mill-stores. One of the four partners, namely, Patel Harjivandas Hathibhai, died on May 25, 1967. Thereafter, a new partnership was entered into between the three surviving partners and the widow of the deceased. This new partnership deed was executed on June 15, 1967, and the new partnership was to come into existence from. May 26, 1967. Under the new deed of partnership the widow of the deceased was given 10 per cent. share in the profits and the three surviving partners of the old firm were given 30 per cent. share each in the profits of the firm. The assessee contended that two separate assessments should be made on the firm because, on the death of Harjivandas Hathibhai, one of the partners, the firm was automatically dissolved since in the deed of partnership of April 29, 1960, there was no provision in the terms of the partnership deed that, on the death of one of the parties, the firm was to continue. It was contended that, on the death of Harjivandas Hathibhai on May 25, 1967, the old firm was dissolved and, thereafter, a new firm came into existence with effect from May 26, 1967. The profits of the business were divided on time-basis between the two firms for the period November 13, 1966, to May 25, 1967, for the undissolved (sic) firm and for the period May 26, 1967, to November 2, 1967, for the new firm. It was contended that the income for the two periods mentioned above should not be clubbed together. The Income-tax Officer took various factors into consideration and came to the conclusion that there was a mere change in the constitution of the firm and nothing more and, therefore, the provisions of section 187 of the Income-tax Act, 1961, were attracted and the income of the two periods should be clubbed together. Against the decision of the Income-tax Officer, the assessee took the matter in appeal and the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer and dismissed the appeal. The matter was, thereafter, taken in further appeal by the assessee to the Income-tax Appellate Tribunal and the Tribunal held that where there was a dissolution in law, section 187 was not applicable and the Tribunal held that the old firm was dissolved on the death of the partner and, therefore, directed that there should be two separate assessments for the two periods. Thereafter, at the instance of the revenue the following three questions have been referred to us for our opinion :

"(1) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that on the death of Shri Harjivandas Hathibhai, the partnership firm was dissolved is erroneous in law ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that section 187 of the Act would not be applicable in the case of the assessee ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing that there should be two separate assessments for the two periods from November 13, 1966, to May 25, 1967, and from May 26, 1967, to November 2, 1967 ?"

2. Before discussing the several authorities which have been cited before us, it would be better to refer to the provisions of sections 187, 188 an