What is the procedure of Assessment when section 184 not complied with? What is change in constitution of a firm? What is succession of one firm by another firm? Section 185, 187 and 188 of Income Tax Act 1961

Assessment when section 184 not complied with, Change in constitution of a firm and Succession of one firm by another firm are defined under section 185, 187 and 188 of Income Tax Act 1961. Provisions under these Sections are :

Section 185 of Income Tax Act "Assessment when section 184 not complied with"

Section 185. Notwithstanding anything contained in any other provision of this Act, where a firm does not comply with the provisions of section 184 for any assessment year, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession" and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28.

 

Section 187 of Income Tax Act "Change in constitution of a firm"

187. (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.
(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 :

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.

 

Section 188 of Income Tax Act "Succession of one firm by another firm"

Section 188. 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.

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