DISTRIBUTION OF PROPERTY ON DISSOLUTION OF PARTNERSHIP FIRM
This query is : Resolved
12 August 2024
The firms property was transferred in the name of partners on dissolution of partnership deed. And no stamp duty was paid .Now we are being demanded to pay the same. When we contested that
it is exempted the Authorities are not listening.
it is exempted the Authorities are not listening.
13 August 2024
Stamp duty payment and registration not required.
This question has been addressed by the Supreme Court and relevant High Courts, in its various judgments[1] as stated below:
(a) a firm has no legal existence under the Partnership Act and the partnership property will, therefore, be deemed to be held by the partners for the business of the partnership. The whole concept of a partnership is to embark upon a joint venture and for that purpose to bring in money or even property (including immovable property) as capital. Once that is done, whatever is brought in would cease to be the exclusive property of the person who brought it in and would be the trading asset of the partnership in which all partners would have interest in proportion to their share in the joint venture of the business of the partnership.
(b) on dissolution of the partnership firm, accounts are settled among partners and the assets of the partnership are distributed among partners as per their respective share in the firm and such distribution does not amount to a sale as ‘sale’ according to its ordinary meaning is a transfer of property for a price, and adjustment of the rights of partners in a dissolved firm is not a transfer, nor is it for a price.
(c) in case of distribution of assets by way of an arbitration award, such award does not require registration under Section 17 of the Registration Act since it does not transfer or assign interest in any asset.
Thus, (i) the consequence of distribution or division of allotment of assets after dissolution is nothing but a mutual adjustment of rights between the partners i.e. the assets, which before the dissolution of the firm belonged to each partner, and will after dissolution of the firm stand allotted to the partners individually and (ii) there is no transfer of assets involved even in the sense of extinguishment of the firm’s rights in the assets when distribution takes place upon dissolution of the firm.
Conclusion:
Based on the various judicial precedents, we can conclude that distribution of immovable property among individual partners as per their respective share in the firm upon dissolution of a partnership firm, does not tantamount to a ‘transfer’ and nor does it entail creation of right, title and interest in the immovable property and accordingly the instrument recording such distribution will not require registration under Section 17 of Registration Act.
This question has been addressed by the Supreme Court and relevant High Courts, in its various judgments[1] as stated below:
(a) a firm has no legal existence under the Partnership Act and the partnership property will, therefore, be deemed to be held by the partners for the business of the partnership. The whole concept of a partnership is to embark upon a joint venture and for that purpose to bring in money or even property (including immovable property) as capital. Once that is done, whatever is brought in would cease to be the exclusive property of the person who brought it in and would be the trading asset of the partnership in which all partners would have interest in proportion to their share in the joint venture of the business of the partnership.
(b) on dissolution of the partnership firm, accounts are settled among partners and the assets of the partnership are distributed among partners as per their respective share in the firm and such distribution does not amount to a sale as ‘sale’ according to its ordinary meaning is a transfer of property for a price, and adjustment of the rights of partners in a dissolved firm is not a transfer, nor is it for a price.
(c) in case of distribution of assets by way of an arbitration award, such award does not require registration under Section 17 of the Registration Act since it does not transfer or assign interest in any asset.
Thus, (i) the consequence of distribution or division of allotment of assets after dissolution is nothing but a mutual adjustment of rights between the partners i.e. the assets, which before the dissolution of the firm belonged to each partner, and will after dissolution of the firm stand allotted to the partners individually and (ii) there is no transfer of assets involved even in the sense of extinguishment of the firm’s rights in the assets when distribution takes place upon dissolution of the firm.
Conclusion:
Based on the various judicial precedents, we can conclude that distribution of immovable property among individual partners as per their respective share in the firm upon dissolution of a partnership firm, does not tantamount to a ‘transfer’ and nor does it entail creation of right, title and interest in the immovable property and accordingly the instrument recording such distribution will not require registration under Section 17 of Registration Act.
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CG Tax On residential property
- Applicable TDS for Purchase of Flat from NRI
- Claiming exemption of perquisite for employee-owned car under New Tax Regime in ITR-2
- Under construction property in ITR
- Gift of mutual fund units to daughter
- Not able to file ITR
- Upload Level ValidationITR3Category of Defect B/D
- Building tax payment deduction in rental Income
- Reporting of STCG on Property in ITR
- NRI ITR2 account in 2025-26 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.
- PF Taxable Income
- Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3
- Interest credited in FY2025-2026 & TDS therein by EPFO does not reflect in AIS or Form 26AS
- 44ad eligble money lending interest
- Delisted shares sold in off market/ Rebate u/s87A
- In Exports Sales HSN details where to fill
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- Difference in tax comparison report
- Gst invoice numbering and delivery challan numbering
- Sales amount in Gstr1
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
