D. K. JAIN ( 1 ) AT the instance of the revenue the Income-taxappellate Tribunal has referred under Section 256 (1) of the Income-taxact. 1961 (for short the Act), the following question for the opinionof this Court :whether on the Pacts and in the circunistanees of the case,the Tribunal was right in holding that the present wasnot a case of change in the Constitution of the linn,and in directing that separate assessments be made onthe two firms, instead of one consolidated assessment?" ( 2 ) THE material facts as found and narrated by the Tribunal inthe statement of the case are as follows : ( 3 ) ORIGINALLY the assesses firm consisted of five partners with aminor admitted to the benefits of the partnership. With effect from 1/01/1969 there were certain changes in the constitution of the firm,with which we are not concerned, except to mention that the deed ofpartnership contained the following three clauses : "17. That if any party desires to retire from the partnershipbusiness he shall have to give at least three months noticeto the remaining partners and can retire while settling hisaccounts at the close of the accounting year and in sodoing the outgoing party shall not be entitled to the rightsor value of the goodwill of the partnership business. 18. That the partnership being at will, it may be dissolved bythe mutual consent of all the partners hereto. 19. That in the event of death of any party, the partnershipshall not be dissolved but the heir or heirs of the deceasedpartner shall be entitled to step into his place in the partnership business. " ( 4 ) IT appears from the preamble of the deed of dissolution dated 2/05/1969 that on account of some differences between the partners,they decided to dissolve the firm. Accordingly, on 2/05/1969 thepartners of the firm drew two deeds-one of them was the deed ofdissolution of the firm w. e. f. 30/04/1969. By this dissolution deed,all the assets and liabilities of the firm were to be taken over by twopartners and the other partners were to be paid the amount standingto their credit in the balance sheet. The other deed was an instrumentof partnership by which a new partnership firm was formed with theabove two partners alongwith two other persons. In addition, twominors were also admitted to the benefits of the firm. The other deed was an instrumentof partnership by which a new partnership firm was formed with theabove two partners alongwith two other persons. In addition, twominors were also admitted to the benefits of the firm. The terms andconditions of the newly constituted firm were set out in the new partnership deed. The name of the firm and the nature of the business. however, continued to be I ho same as before. The new firm commenced its business from 1/05/1969. The accounting period of theoriginal as well as the new firm was the calendar year. ( 5 ) FOR the assessment year 1970-71, for which the accountingperiod ended on 31/12/1969, the assessee firm filed two returnsof income claiming that during the previous year there were two firmsin existence; (i) from I January 1969 to 30/04/1969 and (ii) from 1/05/1969 to 31/12/1969, when the newly constituted firmcarried on the business. The Income-tax Officer did not accept thisclaim. He took the view that it was merely a change in the constitutionof the firm during the previous year as contemplated by Scetion187 (2) of the Act. He, therefore, assessed the entire income for theperiod from 1/01/1969 to 31/12/1969 in the hands of thenewly constituted firm. On appeal, the Appellate Assistant Commissioner held that the old firm had been dissolved and that the secondfirm could not be treated as a reconstitution of the previous firm and,therefore, assessee s case did not fall under Section 187 (2) of the Act,he accordingly directed separate assessments in respect of the incomefor the two periods, viz. , 1/01/1969 to 30/04/1969 and 1/05/1969 to 31/12/1969. ( 6 ) AGGRIEVED by the decision of the Appcllate Assistant Commissioner, the revenue preferred an appeal to the Tribunal. There wasa difference of opinion between the Judicial Member and the Accountant Member. The Judicial Member took the view that in view ofprovisions of Section 187 of the Act, the Income-tax Officer was justified in making a single assessment for both the said periods. There wasa difference of opinion between the Judicial Member and the Accountant Member. The Judicial Member took the view that in view ofprovisions of Section 187 of the Act, the Income-tax Officer was justified in making a single assessment for both the said periods. On theother hand the Accountant Member was of the view that the provisionsof Section 187 (2) came into operation only where in the eye of law thesame firm continued to exist but that where a firm stood dissolved inlaw and in terms of the contract concerning the partnership, thelanguage of Section 187 (2) could not be onsidered to be wide enoughto authorise single assessment on the successor firm under Section187 (1) of the Act. On account of this difference of opinion, thematter was referred to the third Member, who agreed with the viewtaken by the Accountant Member. Thus. by majority view thetribunal held that the income of the old and the newly formed firmshould be assessed separately for the aforesaid two periods and thetax liability determined accordingly. Hence the present reference. ( 7 ) ON the above facts, the point referred for our opinion is whetherthe income earned by the old dissolved firm is to be clubbed with theincome of the newly constituted firm and assessed as such in thehards of the reconstituted firm. ( 8 ) TO us, the matter appears to be simple in that it is not a case ofcontinuation of old firm, to which only Section 187 of the Act wouldbe attracted but of dissolution of old firm on execution of the dissolution deed and the emergence of a new distinct firm under a newpartnership deed executed on 2/05/1969. As such answer to thequestion has to be in the affirmative. We also feel that after thedecision of the Supreme Court in Wazid Ali Abid Ah v. C. I. T. , (1988) 169 ITR 761 and of this Court in Commissioner of Income Tax v. Sant Lal Arvindkumar, (1982) 136 ITR 379 the controversy involved in the casehas been laid to rest. ( 9 ) HOWEVER, Mr. We also feel that after thedecision of the Supreme Court in Wazid Ali Abid Ah v. C. I. T. , (1988) 169 ITR 761 and of this Court in Commissioner of Income Tax v. Sant Lal Arvindkumar, (1982) 136 ITR 379 the controversy involved in the casehas been laid to rest. ( 9 ) HOWEVER, Mr. B. Gupta, learned counsel for the revenue hasraised the three contentions as below: (i) When on 2 May I960 thereconstituted firm came into existence, it was a case of retirement ofsome partners and induction of some others with four partners continuing in the partnership as before and, therefore, when the deeddid not say that retirement will result in dissolution. It was in anycase a case of change in constitution of firm under Section 187 (2) readwith Section 188 of the Act; (ii) the special provisions of Section187 (2) and 188 having been enacted to prevent tax evasion, theseshould be interpreted in such a way that these are not renderednugatory or otiose and (iii) the dicision of the five Judges Bench of theallahabad High Court in Vishwanath Seth v. C. I. T. , (1984) 146 ITR249 having not been over-ruled by the Supreme Court in Wazidali s case, it continues to be good law even today and should beapplied to the facts in hand. In support of the last contention,reliance is placed on a Division Bench Decision of the Allahabadhigh Court in Commissioner of Income Tax v. Basant Behari Gopal Behari and Co. , (1988)172 ITR 662 . He also submits that although in Sant Lal Arvindkumar s case, there are certain observationswhich go against thestand point of the revenue, but in so far as the question of applicabilityof Sections 187 and 188 of the Act to the facts of the present case isconcerned, its ratio cannot apply because all the decisions relied uponin that case were cases of death of a partner. He assets that theconcept of firm under Section 187 is different from the one under thepartnership Act. ( 10 ) THE first contention is fallacious. It is not a case of mereretirement but of dissolution of the firm and formation of a new firmunder a new partnership agreement. Retirement is severance ofhis relationship by some partner (s) from the other partners continuingthe said business as before. Dissolution of firm is between all thepartners on which heretofore relationship ceases between all. It is not a case of mereretirement but of dissolution of the firm and formation of a new firmunder a new partnership agreement. Retirement is severance ofhis relationship by some partner (s) from the other partners continuingthe said business as before. Dissolution of firm is between all thepartners on which heretofore relationship ceases between all. In the present case, the preamble of the deed of dissolution negatives thecontention that it was a case of mere retirement. The prime quetionis not whether some of the old partners also happen to be partners inthe newly constituted firm but whether the old firm continued to existor finished and instead a new firm came into existence. Merelybecause some partners of the old dissolved firm also became partnersmetal Store, Delhiin the new firm it cannot be said that it is a continuation of the oldfirm. The old firm stood dissolved on execution of the dissolutiondeed. A partnership is a relation between the persons who aveagreed to share the profits of a business carried on by all or any oneof them acting for all. The relationship between them is essentiallycontractual. On dissolution of the firm on 2/05/1969 this relationship terminated. It could not continue. Of course it was open to someof them) as in the instant case, alongwith others to enter into a newrelationship constituting a new firm. Such a firm cannot be said tobe a continuation of the old dissolved firm or to have been re-constituted under Section 187 (2) of the Act but the formation of a new firmsucceeding the old firm, falling within the ambit of Section 188 of theact. ( 11 ) THE second contention, we feel has to be stated to be rejected. In the light of the view taken by this Court in Sant Lal Arvind Kumar scase, with which we are in respectful agreement, we feel that therebeing no conflict between Section 187 and the general provisions of thepartnership Act, the argument does not survive for consideration. Even otherwise, it was never the case of the revenue that in the presentcase change in constitution of the firm was effected, w. e. f. 1/05/1969,with a view to avoid tax. Right from the assessment stage till thesecond appeal before the Tribunal, the only legal issue raised waswith reference to the applicability of Section 187 and nothing else. Even otherwise, it was never the case of the revenue that in the presentcase change in constitution of the firm was effected, w. e. f. 1/05/1969,with a view to avoid tax. Right from the assessment stage till thesecond appeal before the Tribunal, the only legal issue raised waswith reference to the applicability of Section 187 and nothing else. We cannot permit the revenue to raise this issue in these proceedingsat this late stage, particularly when it would involve fresh investigationinto facts. ( 12 ) COMING to the third contention of Mr. Gupta, which is basedon the decision of the Allahabad High curt in Basant Behari Gopalbehari and Cots case (supra), (which is otherwise distinguishable beingconfined to its own facts not available here), wherein the Divisionbench of that Court has taken the view that in Wazid Ali s case, thesupreme Court had not over-ruled its Five Judges Full Bench decisionin Vishwanath Seth s case (supra ). According to the Division Bench,there was no occasion for the Supreme Court in Wazid Ali s case. loover-rule the decision in Vishwanath Seth s case and, therefore, inthat view of the matter, the Full Bench decision in Vishwanath Seth scase continued to be a binding decision despite the decision of thesupreme Court in Wazid Ali s case. ( 13 ) ON a careful perusal of the decision of the Supreme Court inwazid Ali s case, we are unable to persuade ourselves to read the saiddecision the way the Allahabad High Court has read it in Basantbehari Gopal Behari s case. One of the judgments noticed and clearlyapproved by the Supreme Court in Wazid Ali s case was the Benchdecision of the Allahabad High Court in Commissioner of Income Tax v. Shiv Shankar Lalram Nath, (1977) 106 ITR 3426 which had been reversed by the fivejudges Full Bernch in Vishwanath Seth s case. The Supreme Courtdealt with this decision and the said two Full Bench decisions of thesame High Court as under : "cit v. Shiv Shanker Lal Ram Nath (1977) 106 ITR 342 isa Bench decision of the Alahabad High Court whichheld that in case where a firm is reconstituted, theold firm cases to exist. It was observed by the courtthat section 187 of the Act even by implication does notcreate a fiction that the income derived by the old firmbecomes the income of the reconstituted film. It was observed by the courtthat section 187 of the Act even by implication does notcreate a fiction that the income derived by the old firmbecomes the income of the reconstituted film. Thehigh Court held that the Tribunal was right in holdingthat after reconstitution, it becomes a separate assessableunit. The same High Court in a Full Bench decision offive Judges held that it was well settled that on the deathof a partner, the consitution of the firm changes. Itobserved that if a partner dies and is replaced by a legalrepresentative, there is a change in the constitution of thefirm and the new firm will be liable in respect of the income dervied from the old firm. The Full Bench suggested that after the reconstitution, the firm becomes adistinct assessable entity, different from the firm beforeits reconstitution. It observed that two different assessment orders had to be passed, one in respect of incomederived by it before reconsitution and the other in respectof income derived after its. reconstitution. The decisionunder appeal here was over-ruled by the said Full Benchdecision. But the Full Bench of the Allahabad Highcourt consisting of five learned judges in Vishwanathseth v. Commissioner of Income Tax (1984) 146 ITB. 24. 9 over-ruled the previousdecision of that Court in Commissioner of Income Tax v. Shiv Shankar Lal Ram Nath (1977) 106 ITR 342 and Badri Narain Kashi Prasadv. Additional Commissioner of Income Tax (1978) 115 ITR 858 (All) (FB ). This Fullbench ruled that under the general law of partnershipunder the Indian Partnership Act as well as under section187 of the Act in the case of reconstitution of a firm, itretains its identity and is assessable in respect of the entireprevious year. In view, however, of the scheme of Chapter XVI of the Act, we are unable to agree; if we were leftwith the general position under the India Partnershipact, we might have agreed. " ( 14 ) THE above paragraph leaves little room for doubt in our mindthat the Supreme Court has. in clear terms, approved the decision ofthe Division Bench in Shiv Shankar Lal Ram Nath s case (supra),which was also approved by the three Judges full Bench of the samecourt in Badri Narain Kashi Prasad s case and did not agree withthe contrary view taken by the five Judges Bench in Vishwanathseth s case. in clear terms, approved the decision ofthe Division Bench in Shiv Shankar Lal Ram Nath s case (supra),which was also approved by the three Judges full Bench of the samecourt in Badri Narain Kashi Prasad s case and did not agree withthe contrary view taken by the five Judges Bench in Vishwanathseth s case. It is also clear from the fact that the Supreme Court hascagtegorically disapproved the view taken by the Full Bench ofmadhya Pradesh High Court in Girdharilal Nannelal v. Commissioner of Income Tax (1984)147 ITR 529, which was similar to the one taken in Vishwanath scase and contrary to the view taken by the Division Bench in Shivshankar Lal Ram Nath s case. ( 15 ) THE facts of the case in hand are similar to the facts in Shivshankar Lal Ram Nath s case (supra ). That was also a case when:two partners had quitted and gone out and in their place two otherswere taken in as partners along with two minors, who were admittedto the benefits of the partnership and in these facts it was held thatnotwithstanding the provisions of Section 187 of the Act, the firm,after it underwent change in its constitution, became an assessableentity, which for the purpose of assessment, was distinet from the firmas it stood before reeonstitution and that the income derived by theold firm ought to be assessed in the hands of the new firm separatelyand without clubbing it with the income derived by it after reconstitution. The said decision having been dealt with specifically and thenapproved by the Supreme Court, we are of the opinion that it mustbe accepted as laying down the correct law and is on all fours to thefacts of the present ease. Even otherwise, the ratio of the judgmentof the Supreme Court in Wazid Ali s case (supra) supports the majority view taken by the Tribunal. ( 16 ) BEFORE parting with the case, we may also deal with the lastcontention urged by Mr. Gupta that the ratio of the decision in Santlal Arvind Kumar s case is not applicable on the facts of instant case,the pronouncement of the Supreme Court in Wazid Ali s case (supra ). wherein the decision of this Court in Sant Lal Arvind Kumar (supra)has also been considered and approved, is very clear and leaves noscope for any doubt that the point in issue, viz. , whether in a situation. wherein the decision of this Court in Sant Lal Arvind Kumar (supra)has also been considered and approved, is very clear and leaves noscope for any doubt that the point in issue, viz. , whether in a situation. as prevailing in the instant case, it would be a case of succession governed by Section 188 or a case of mere change in constitutin to whichsection 187 of the Act is applicable, is no longer resintegra and thatthat there is no merit in the contention. We, therefore, feel that itis not necessary for us to re-analyse the provisions of Sections 187to 189 of the Act, which deal with the procedure to be adopted forassessment of the firm in the event of change in constitution, succession and dissolution in greater detail. ( 17 ) SUFFICE it to say that Section 187 (1) of the Act lays down thatwhere at the time of making an assessment under Section 143 or 144,it is found that a change has occurred in the constitution of a firm,assessment shall be made on the firm as it exists at the time of makingthe assessment. Sub-section (2) of Section 187 merely clarifies asto what would a change in constitution mean for the purpose of Section 187. Section 188 provides for assessment in the case of succession of one firm by another and provides that where a firm carrying ona business or profession is succeeded by another firm, and the case isnot covered by Section 187, separate assessments shall be made on thepredecessor firm and the successor firm in accordance with the provisions of Section 170, which deals with the procedure of assessmentetc. in the case of succession of the business or profession otherwisethan on death. Section 189 lays down the manner of assessing afirm which has been dissolved or the business of the firm has beendiscontinued. It provides that the assessment has to be made of thethe total income of the firm as if no such dissolution or discontinuancehad taken place. ( 18 ) FROM the language of Section 187 it is clear that it speaks ofthe firm on whom the assessment is to be made in the event of a changein constitution of the firm. The Section, thus, identifies the personon whom assessment is to be made in the case of change in the constitution as envisaged under Section 187 (2) of the Act. The Section, thus, identifies the personon whom assessment is to be made in the case of change in the constitution as envisaged under Section 187 (2) of the Act. It merely laysdown that it is the firm as constituted at the time of making the assessment who shall be liable for assessment and no further. In Santlal Arvind Kumar (supra) dealing with the question as to whether theterms of Sections 186 to 189 carry any implication that even wherea firm gets dissolved under the provisions of the partnership law itshould be deemed to continue for the purpose of assessment to income-tax, it was held as follows ; "the legislature could have easily said, but did not say, thatthe firm in the circumstances set out in s. 187 (2) shall bedeemed to continue to exists with only a change in theconstitution notwithstanding that under any other lawin force it may be considered to have got dissolved on thedeath of a partner, etc. Not only is there no deeming provision contained in s. 187,the language of that section, particularly sub-s. (2), clearlyenvisages the continued existence of a "firm". It talksof: "a"-firm and "the" firm and it also postulates thatthere are common partners before or after. the changethat is referred to there. This language clearly envisagesthat the provision comes into operation and appliesonly where there is in the eye of law a firm with continuedexistence and not to a case where under the law one firmhas ceased to exist and another has come into existence. It appears to us that to import any such concept ins. 187 would be to travel beyond the ordinary and naturalmeaning of the words used in the context of the partnership law that is clearly applicable and that has not beenexcluded by reason of any specific provision. Thejudicial decision deciding to the contrary appear tohave read into the language of sub s (2) of s. 187 animplication that what all has to be done is to compare thepartners before a particular event and the partners afterthe particular event irrespective of whether the firm hascontinued or not and to have envisaged the definition ins. 187 (2) as intended to transcend dissolutions of firmsunder the partnership law. In our opinion the purpose ofsub-s (2) is not by way of expansion of the normal conceptof A change in the constitution. It appears to be reallya purpose of limitation. 187 (2) as intended to transcend dissolutions of firmsunder the partnership law. In our opinion the purpose ofsub-s (2) is not by way of expansion of the normal conceptof A change in the constitution. It appears to be reallya purpose of limitation. The purpose of the definition insub-s (2) appears to be not to say that a firm will continuein spite of dissolution but rather to say that even in acase where there is only a change in the constitution theprovisions of sub-s. (l) will not apply even if the partnersbefore and after the change are not common. " ( 19 ) THEN again, considering the effect of the words "of successionnot being a case falling under Section 187", appearing in Section 188,on which much emphasis has been laid by Mr. Gupta the Court observed as under : "in our opinion, however, too much of significance cannotbe attached to these words. In the first place, the languageof s. 187 has to be interpreted on its own and s. 1. 88 doesnot put any further meaning into it. It will be remembered here that under the common law doctrine, whichwe have already referred to a firm has no legal personalityat all apart from the partners. Under that commonlaw doctrine even an ordinary change in the constitutionwhich would normally fall within Chap. V. of the Indianpartnership Act would result in a case of succession. In fact it will beappropriate to notice that this was exactly the difficulty that arose in the case of A. W. Figgiesand company (1953) 24 ITR 405 (SC) considered by thesupreme court. In that case there were many changesin the constitution of the firm and it was argued by thedepartment, notwithstanding a specific exception ins. 25 (4), that these were not mere changes in the constitution but really a case of repeated succession, there havingbeen a dissolution on each of the occasions of one firmand the formation of a new firm. It is in order to avoidcontentions of that type that section 188 appears to haveused the words above referred to. The intention of thesewords is that merely because there is a change in theconstitution of the firm, it should not be argued that thereis a succession of one set of persons by another becausesuch a case would be really covered by s. 187. The intention of thesewords is that merely because there is a change in theconstitution of the firm, it should not be argued that thereis a succession of one set of persons by another becausesuch a case would be really covered by s. 187. We,therefore, think that the language of s. 188, though creating a mild ambiguity, is not merely not inconsistent orcontradictory but is only intended to clarify the meaningof s. 187 and to exclude the possibility of the applicabilityof the common law doctrine regarding the personalityof a firm even in cases of mere change in the constitution. " ( 20 ) WHILE considering this dicision in Wazid Ali s case (supra), the Supreme Court observed thus ; "with respect, we agree that where in a case, there is a changein the constitution of the firm by taking of a new partnerand the old firm is succeeded by a new firm then, in sucha case, there might be succession and there could be twoassessments as contemplated under Section 188 of theact. We accept the reasoning of that decision. " ( 21 ) FROM the above observations of the Supreffie Court it is evidentthat it has approved the approach of this Court in Sant lal Arvindkumar s case. Its fallo would apply. We, therefore, reject the contentionthat the law laid down in Sant Lal Arvind Kumar s case isnot applicable to the facts of the present case. ( 22 ). In view of the foregoing discussion we have no hesitation inandotsing the view taken by the Tribunal that the income derived bythe old firm from 1/01/1969 to 30/04/1969 should be assessedin the hands of the newly constituted assessee firm separately from theincome derived by it for the period from I May 1969 to 31/12/1969 and income for both the periods should not be clubbed togetherfor the purpose of assessment on the assessee firm. We Would accordingly answer the question referred to us in the affirmative, thatis, in favour of the assessee and against the revenue. ( 23 ) SINCE the assessee is not represented, there will be no order as to costs.