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Dissolve a Parnership Farm

Dissolving a partnership firm means discontinuing the business under the name of the said partnership firm. Dissolving a partnership firm is different from dissolving a partnership. In the former case, the firm ends its name and hence cannot do business in the future. But in case of dissolving a partnership, the existing partnership is dissolved by consent or on happening of a certain event, but the firm can retain its existence if remaining partners enter into a new partnership agreement. A partner may dissolve a partnership firm at any time. When any business or profession carried on by a firm has been discontinued, or where a firm is dissolved, an Assessing Officer would assess the total income of the partnership firm as if no such dissolution or discontinuance has taken place. The process of dissolving a partnership firm involves the sale or disposal of all the assets of the firm, a final settlement of all of its liabilities, and the settling of the accounts. In this article, we look at Section 189 of the Income Tax Act that deals with the Dissolution of a Partnership Firm.