(1) If it is found that the constitution of a firm has changed during the tax assessment, the tax of the newly formed firm shall be determined during the tax assessment.

(2) For the purpose of inclusion the income of any taxable year specified under sub-section (1) in the total income of the partners of the firm, the income shall be distributed proportionately among the partners who are entitled to receive a share of the income in that income year; when if it is not possible to collect the tax from him, it shall be collected from the firm formed at the time of assessment.

(3) For the purposes of this section, a change in the constitution of a firm shall be deemed to have been made in the following cases, namely.-

(a) where there is a change in respect of shares of the partners or in the shares of any of them, all the partners remain present; or

(b) where one or more principal partners continue to exist in the firm notwithstanding the change brought about by the dissolution of the ownership of one or more partners or the inclusion of one or more new partners.