JUDGMENT M. Katju, J.
This is an ITR under section 256(1) of the Income Tax Act, in which the following questions have been referred to us for our opinion :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing the Income Tax Officer to make two separate assessments for the two periods ?
2. Whether, on the facts and in the circumstances of the case, the provisions of section 187(2) were not applicable to the facts of the instant case
2. The assessee is a registered partnership firm and the relevant assessment year is 1976-77. During that financial year one of the partners Chandra Bhushan Misra died on 12-1-1975 and the question involved in this reference is whether there should be two assessments or a single assessment in the relevant year. Ordinarily when a partner dies the partnership stands automatically dissolved in view of section 42(c) of the Partnership Act and section 187(2) of the Income Tax Act. However, if the partnership deed mentions that the partnership will continue even after death of a partner it will not stand dissolved.
2. The assessee is a registered partnership firm and the relevant assessment year is 1976-77. During that financial year one of the partners Chandra Bhushan Misra died on 12-1-1975 and the question involved in this reference is whether there should be two assessments or a single assessment in the relevant year. Ordinarily when a partner dies the partnership stands automatically dissolved in view of section 42(c) of the Partnership Act and section 187(2) of the Income Tax Act. However, if the partnership deed mentions that the partnership will continue even after death of a partner it will not stand dissolved.
3. We have carefully perused the partnership deed.
3. We have carefully perused the partnership deed.
Clause 5 of the partnership deed states :
"That in case of death of any partner his heir or executor shall be entitled and enjoy the same rights and benefits in the partnership business till the end of that year."
4. In our opinion the above clause implies that even if a partner dies then at least till the end of the financial year the business will continue, and the heirs will step in the shoes of the partner. Hence the partnership will not stand automatically dissolved on the death of the partner.
4. In our opinion the above clause implies that even if a partner dies then at least till the end of the financial year the business will continue, and the heirs will step in the shoes of the partner. Hence the partnership will not stand automatically dissolved on the death of the partner.
5. Hence in view of decision of the Supreme Court in CIT v. Empire Estate (1996) 218 ITR 355 we are of the opinion that there has to be a single assessment and not two assessments. The reference is, answered in the negative, i.e., in the favour of the department and against the assessee.
5. Hence in view of decision of the Supreme Court in CIT v. Empire Estate (1996) 218 ITR 355 we are of the opinion that there has to be a single assessment and not two assessments. The reference is, answered in the negative, i.e., in the favour of the department and against the assessee.