Satish Chandra, C.J.
1. This reference relates to the assessment year 1968-69. The assessee is a registered partnership firm. One of the partners, Sri Ujagarmal, died on 14th March, 1967. On that date two other partners retired. The books of accounts were closed on 14th March, 1967. Profits up to that period were divided amongst the various partners. With effect from 15th March, 1967, under a fresh partnership deed the firm continued with three continuing partners and three fresh persons. A minor was also admitted to its benefits.
2. The assessee filed two returns of income, (i) for the period 2nd December, 1966, to 14th March, 1967, and (ii) for the period 15th March, 1967, to 24th October, 1967. The ITO held that the change in the constitution of the firm did not entail the coming into existence of a different legal entity. He assessed the firm for the entire period, 2nd December, 1966, to 24th October, 1967. This view was affirmed in appeal as well as in further appeal by the Tribunal. At the instance of the assessee, the Tribunal has referred for our opinion the following question of law :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was only a change in the constitution of the firm on March 14, 1967, within the meaning of Section 187(2) of the I.T. Act, 1961, and, therefore, one single assessment covering both the periods was justified ?'
3. This point came up for consideration before a Full Bench of this court in Dahi Laxmi Dal Factory v. ITO : 103ITR517(All) . The Full Bench held that Section 187 does not apply where a firm is dissolved either by agreement or by operation of law and a new firm takes over the business. This is a case of succession governed by Section 188 of the Act. On the death of a partner and in the absence of any express stipulation that in such an event the firm shall not stand dissolved, the firm stands dissolved in the eye of law. In such a case the periods before and after the dissolution of the firm cannot be combined.
4. Applying this Full Bench decision it is clear that the two periods could not be combined. Ujagarmal, one of the partners, died and there was no stipulation that under the circumstances the firm will not stand dissolved. The conduct of the parties shows that the firm stood dissolved in fact as well as in law and with effect from 15th March, 1967, a new firm took over the business. Under these circumstances the two periods could not be combined for the purposes of the assessment to income-tax.
5. The question referred for our opinion is answered in the negative in favour of the assessee and against the department. The assessee will be entitled to costs, which we assess at Rs. 200.