A partnership firm is not dissolved when..........

The correct answer is Option (1) → A new partner is admitted into firm.

On the admission of a new partner the old agreement among the partners comes to an end and a new one takes its place: the partnership is reconstituted, but the firm continues its business under the same name. So admission does not dissolve the partnership firm.

Option (2) Firm's business is closed down permanently. — Incorrect. When the business is closed for good, the firm itself is dissolved: its assets are realised and liabilities paid.

Option (3) Firm's books of accounts are permanently closed. — Incorrect. The books are closed for good only when the firm is dissolved; a reconstituted firm keeps its books.

Option (4) Economic relationship between partners comes to an end. — Incorrect. When the economic relationship among all the partners ends, the firm is dissolved; in dissolution of the firm both the partnership and the firm come to an end.

Note: NTA dropped this question. For the benefit of students and to give them additional practice, the question has been suitably modified so that it has one clear answer.