Section 328
Section 328: succession of one firm by another firm
Section 328 deals with what happens for tax purposes when one firm carrying on a business or profession is succeeded by an entirely different firm, rather than simply changing its own partners. It sets the basic rule of separate assessments for the old and new firm.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
What Section 328 says
"Where a firm carrying on a business or profession is succeeded by another firm, except in a case covered by section 327, separate assessments shall be made on the predecessor firm and the successor firm as per the provisions of section 313."
So the rule only applies where there is genuine succession by another firm - not a mere change in the constitution of the same firm (which is instead governed by Section 327). Where succession does happen, the predecessor firm and the successor firm are assessed separately, following the procedure in Section 313.
Why the distinction matters
Section 327 covers a change in constitution of a firm (for example, partners joining or leaving the same firm), which is treated differently from an outright succession by another firm. Section 328 makes clear that once the change goes beyond a mere reconstitution and becomes succession by a genuinely different firm, two separate assessments are required instead of one continuing assessment - one for the predecessor firm up to the point of succession, and one for the successor firm thereafter.
Frequently asked questions
Does Section 328 apply if a firm just adds or removes a partner?
No. A mere change in the constitution of a firm is dealt with under Section 327, not Section 328. Section 328 applies specifically where one firm is succeeded by another firm.
How many assessments are made when Section 328 applies?
Two separate assessments - one on the predecessor firm and one on the successor firm - made as per the provisions of Section 313.
Related sections
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Talk to our tax team about firm succession and assessmentLast updated 9 September 2026