Sivarajan, J.

This is an appeal filed by the Commissioner of Income Tax, Thiruvananthapuram against the order of Income Tax Appellate Tribunal, Cochin Bench in ITA.No.23(Coch) / 96 dt.17-9-1999. The matter arises under the Income Tax Act, 1961 (for short ‘the Act’). The assessment year is 1991-1992; the relevant previous year ending 31-3-1991. The respondent assessee is a partnership firm engaged in the business of Fertilisers, Pesticides, etc. The said firm was originally constituted by a partnership deed dated 2nd March, 1981 (Annexure-B). The firm consisted of three partners, Sri. P.T.Cheriyan, Mrs.Santha Benjamin and Mrs.Annie Thomas. It was granted registration and the same was being continued. However, two of the said partners i.e. Mrs.Santha Benjamin and Mrs.Annie Thomas had expressed their desire to retire from the partnership and gave notice accordingly. On June 14, 1990 a new partnership deed (Annexure-C) was executed between Sri.P.T.Cheriyan, who was the partner in the original partnership deed, Sri.P.B.Titus and Mrs.Mary Thomas as partners.

2. For the assessment year 1991-’92 the firm filed two separate returns, one for the period from 1-4-1990 to 13-6-1990 and the other for the period from 14-6-1990 to 31-3-1991. This was on the ground that on the retirement of the two partners of the firm as originally constituted the said partnership ceased to exist by operation of law and subsequently another partnership deed was executed by the remaining partner along with two others. According to the assessee this is a case of succession covered by Section 180 of the Act and therefore two separate assessments are contemplated as provided under Sec.170 of the Act. The assessing officer however took the view that there was no dissolution of the original partnership of 14-6-1990 when two partners retired and that it was a case of change in the constitution within the meaning of Section 187(2) of the Act when two partners retired and two others were inducted as partners. The assessing officer accordingly completed a single assessment on the partnership firm for the period from 1-4-1990 to 31-3-1991. Being aggrieved by the said order the assessee filed appeal before the Commissioner of Income Tax (Appeals) who by his order dt.30-10-1995 (Annexure-D) allowed the said appeal by directing the assessing officer to make two separate assessments, one for the period from 1-4-1990 to 13-6-1990 and the other for the period from 14.6.1990 to 31.3.1991. This order of the Commissioner of Income Tax (Appeals) was confirmed by the Appellate Tribunal in its order dt.17-9-1999 (Annexure-E). Being aggrieved by the order of the Tribunal the Department has filed this appeal. This court while admitting the appeal ordered notice on the following question of law:

“(1) Whether, on the facts and in the circumstances of the case, does the case fall under Sec.188 of the Incometax Act as a case of one partnership firm succeeding another or only a change of constitution within the meaning of Section 187 (2) of the Income Tax Act when two partners retired and two others were admitted as new partners?

(2) Whether, on the facts and in the circumstances of the case and also in the light of clause 14 of the partnership deed the Tribunal is right in law and fact in holding that “this is a case falling under S.188 of the Income Tax Act as a case of one partnership firm succeeding another?”

(3) We have heard Sri.P.K.R.Menon, Learned Senior Counsel (Government of India), (Taxes) appearing for the appellant and Sri.P.Balakrishnan, leaned counsel appearing for the respondent/assessee.

(4) According to the Senior Counsel for the appellant, when two partners of the old partnership retired on 14-6-1990 and two new partners are inducted simultaneously it was only a case of change in the constitution of the firm attracting the provisions of Section 187(2) of the Act. It is also his contention that in such a case Section 188 of the Act which provides for two separate a