Income Tax Act, 1961
Section 5: Subs. by s. 70,ibid., for section 185 (w.e.f. 12004).
5. Subs. by s. 70,ibid., for section 185 (w.e.f. 12004).
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C.—Changes in constitution, succession and dissolution
187.Change in constitution of a firm.—(1) Where at the time of making an assessment
under section 143 or section 144 it is found that a change has occurred in the constitution of a firm, the
assessment shall be made on the firm as constituted at the time of making the assessment.
1* * * * *
(2) For the purposes of this section, there is a change in the constitution of the firm—
(a) if one or more of the partners cease to be partners or one or more new partners are admitted,
in such circumstances that one or more of the persons who were partners of the firm before the
change continue as partner or partners after the change ; or
(b) where all the partners continue with a change in their respective shares or in the shares of
some of them:
2[Provided that nothing contained in clause (a) shall apply to a case where the firm is dissolved on the
death of any of its partners.]
188. Succession of one firm by another firm.—Where a firm carrying on a business or profession is
succeeded by another firm, and the case is not one covered by section 187, separate assessments shall be
made on the predecessor firm and the successor firm in accordance with the provisions of section 170.
3[188A. Joint and several liability of partners for tax payable by firm.—Every person who was,
during the previous year, a partner of a firm, and the legal representative of any such person who is
deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other
sum payable by the firm for the assessment year to which such previous year is relevant, and all the
provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of
such penalty or other sum.]
189. Firm dissolved or business discontinued.—(1) Where any business or profession carried on by
a firm has been discontinued or where a firm is dissolved, the 4[Assessing Officer] shall make an
assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and
all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum
chargeable under any provision of this Act, shall apply, so far as may be, to such assessment.
(2) Without prejudice to the generality of the foregoing sub-section, if the 4[Assessing Officer] or the
5[Commissioner (Appeals)] in the course of any proceeding under this Act in respect of any such firm as
is referred to in that sub-section is satisfied that the firm was guilty of any of the acts specified in Chapter
XXI, he may impose or direct the imposition of a penalty in accordance with the provisions of that
Chapter.
(3) Every person who was at the time of such discontinuance or dissolution a partner of the firm, and
the legal representative of any such person who is deceased, shall be jointly and severally liable for the
amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall
apply to any such assessment or imposition of penalty or other sum.
6* * * * *
1. The proviso omitted by Act 18 of 1992, s. 67 (w.e.f. 11993). Earlier the proviso was restored by Act 3 of 1989, s. 95
(w.e.f. 11989) which was omitted by Act 4 of 1988, s. 69 (w.e.f. 11989).
Where at the time of making an assessment
under section 143 or section 144 it is found that a change has occurred in the constitution of a firm, the
assessment shall be made on the firm as constituted at the time of making the assessment.
1* * * * *
For the purposes of this section, there is a change in the constitution of the firm—
if one or more of the partners cease to be partners or one or more new partners are admitted,
in such circumstances that one or more of the persons who were partners of the firm before the
change continue as partner or partners after the change ; or
where all the partners continue with a change in their respective shares or in the shares of
some of them:
2[Provided that nothing contained in clause
shall apply to a case where the firm is dissolved on the
death of any of its partners.]
188. Succession of one firm by another firm.—Where a firm carrying on a business or profession is
succeeded by another firm, and the case is not one covered by section 187, separate assessments shall be
made on the predecessor firm and the successor firm in accordance with the provisions of section 170.
3[188A. Joint and several liability of partners for tax payable by firm.—Every person who was,
during the previous year, a partner of a firm, and the legal representative of any such person who is
deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other
sum payable by the firm for the assessment year to which such previous year is relevant, and all the
provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of
such penalty or other sum.]
189. Firm dissolved or business discontinued.—
Where any business or profession carried on by
a firm has been discontinued or where a firm is dissolved, the 4[Assessing Officer] shall make an
assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and
all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum
chargeable under any provision of this Act, shall apply, so far as may be, to such assessment.
Without prejudice to the generality of the foregoing sub-section, if the 4[Assessing Officer] or the
5[Commissioner
Every person who was at the time of such discontinuance or dissolution a partner of the firm, and
the legal representative of any such person who is deceased, shall be jointly and severally liable for the
amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall
apply to any such assessment or imposition of penalty or other sum.
6* * * * *
1. The proviso omitted by Act 18 of 1992, s. 67 (w.e.f. 11993). Earlier the proviso was restored by Act 3 of 1989, s. 95
(w.e.f. 11989) which was omitted by Act 4 of 1988, s. 69 (w.e.f. 11989).