§ 327
Chapter XVII — Special Provisions Relating To Certain Persons
Change in constitution of a firm
Income-tax Act, 2025
When the tax authority makes an assessment under sections 270 or 271 and discovers that the partnership’s composition has changed, the assessment will be based on the firm as it exists at the time of the assessment.
A "change in constitution" means either:
- One or more partners leave or new partners join, provided at least one original partner remains.
- The existing partners stay but alter their profit‑sharing ratios.
This rule does not apply if the firm is dissolved because a partner dies.
📜 Official text of the section +
327. (1) Where at the time of making an assessment under section 270 or 271,
it is found that a change has occurred in the constitution of a firm, the assess-
ment 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, subject to the condition that at least one person
who was partner of the firm before the change continues as partner after
such change; or
( b) where all the partners continue with a change in their respective shares
or in the shares of some of them.
(3) The provisions of sub-section (2)(a) shall not apply to a case where the firm is
dissolved on the death of any of its partners.
Succession of one firm by another firm.
Plain-language summary — not the official text. Refer to the bare Act and confirm with a professional for your specific case.