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Judgment
By the Court - This reference is made under s. 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) at the instance of the Revenue to answer the following two questions of law, namely :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was dissolution of the firm on 19-10-1975 on the death of Shri Gopal Singh, one of the partners ?
Notwithstanding the fact that there was dissolution of the firm on 19-10-1975, whether, the Tribunal was justified in law in holding that provisions of s. 187(2) of the IT Act did not apply even though two of the partners of the existing firm continued to be partners in the new firm constituted by the deed of partnership dt. 1st November, 1975 with retrospective effect from 23rd November, 1975 ?"
The relevant assessment year is 1977-78. Admittedly this is a case governed by ss. 187 and 188 of the Act as they stand after insertion of the proviso in sub-s. (2) of s. 187 retrospectively with effect from 1-4-1975 by the Taxation laws (Amendment) Act, 1984. On the facts and in the circumstances of this case, it is clearly a case of succession governed by s. 188 of the Act, since the applicability of s. 187 is excluded by virtue of the proviso to sub-s. (2) of s. 187. The view taken by the Tribunal that it is a case of succession governed by s. 188 requiring two separate assessments for the two period during the assessment year, is justified.
Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the view taken by the Tribunal is justified. No costs.