Amended and updated notes on section 187 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Change in constitution of a firm.
Chapter XVI (Sections 184 to 189A) of the Income Tax Act 1961 deals with the provisions related to special provisions applicable to firms. Section 187 of IT Act 1961 provides for Change in constitution of a firm.
Recently, we have discussed in detail section 185 (Assessment when section 184 not complied with) of IT Act 1961. Today, we learn the provisions of section 187 of Income-tax Act 1961. The amended provision of section 187 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 187 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-187: Change in constitution of a firm
Section 187(1) of Income Tax Act
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.
Section 187(2) of Income Tax Act
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:
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.