DHANRAJ AND SONS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following two questions are referred at the instance of the assessee under s. 256(1) of the IT Act, 1961 :

(2.) THIS reference is concerned with the asst. yr. 1974 -75. The assessee is a partnership firm. On 31st July, 1974 the firm filed two returns one for the period 1st January, 1973 to 7th April 1973 and the other for the period 8th April, 1973 to 31st December, 1973. The partnership was created originally by a deed dt. 5th January, 1971 in which 7 partners were admitted including one Smt. Kanchanbai Hukamchand Parekh who had 20% share in the profit and loss. She died on 7th April, 1973. Clause 13 of the deed provides that the partnership shall not be dissolved on the death of any partner. The books of accounts were closed on 7th April, 1973 by drawing profit and loss accounts. There was an agreement of dissolution of firm dated 15th April, 1973. The assessee drew new deed of partnership on 17th April, 1973 in which Shri Hukam Chand Parekh husband of deceased Smt Kanchanbai, was taken as a partner. His share was 20% in the profit and loss. There has been variation in the shares of the other partners. The ITO held that it was not a case of succession under s. 188 of the IT Act, but was a case of a change in the constitution governed by s. 187(2). As a result two separate assessments could not be made. The following undisputed positions were noticed by him :

(3.) MR . Thakkar, learned counsel for the assessee, has invited our attention to the following circumstances in support of his contention that it was in reality a case of succession.