How to transfer personal property into partnership

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CA Shailesh Urdhwareshe (Querist)
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03 December 2015 One of my client is presently running his business in a rented premises. now he wants to buy out the same for which the owner is ready. Since the property is valued in crores, it would be a big amount to be spent for registration. is there any way by which these can be saved ? can they form a partnership and the owner of property transfers the property into the firm as his capital contribution and later on he retires from the partnership firm ? Impact of Income Tax at all stages ?

Amol S Joglekar

Amol S Joglekar (Expert)
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03 December 2015 01. For immovable property, registration is must. (And as you claim, if it is worth CRORES, spending few LAKH on registration to perfect the transaction need NOT be viewed as SAVING some money.)

02. The route of making partnership is quite VALID. But then, registration of transfer deed is required to perfect the title of the property in favour of your client.

03. The capital gain is governed as per section 45 of Income Tax Act.

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CA Shailesh Urdhwareshe

CA Shailesh Urdhwareshe (Querist)
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03 December 2015 Any other way ? it is not just saving few lacs towards registration, but blocking the capital in crores in property is the main issue. how to save that ?

Amol S Joglekar

Amol S Joglekar (Expert)
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04 December 2015 Blocking the capital? What do you mean by that?

If your client/you feel that his capital is going to be blocked suggests that reantal premises only is suitable to yourmindset. There seems to be no any CONSUMER SURPLUS for your client in the buy out property deal. You can not have an apple and eat it too.

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CA Shailesh Urdhwareshe

CA Shailesh Urdhwareshe (Querist)
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04 December 2015 By blocking, he means liquidity. ofcourse buying out and registration is the bestest solution, but what he wants is , is there any other way to save registration expenses ? the property owner is ready to co operate provided the way is legitimate.

Amol S Joglekar

Amol S Joglekar (Expert)
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04 December 2015 That is what I am trying to suggest....

Saving in terms of stamp duty and registration is NOT at all a saving in long run. It is in fact invitation to a further complication.

Client may come out with some such high performance vehicles like
creating partnership,
registered will,
nomination,
creating trust
and so on so forth

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CA Shailesh Urdhwareshe

CA Shailesh Urdhwareshe (Querist)
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08 July 2016 Amol ji I appreciate your suggestions. What I mean is that the client would not like his recorded capital to be blocked. If he enters into partnership with the owner and the owner brings in the property as his share and subsequently the owner withdras himself from partnership or is shifted to 1% of sharing. is this a legitimate way ?

Amol S Joglekar

Amol S Joglekar (Expert)
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11 July 2016 every way has its own merrits and demerrits......partnership is having unlimited liability...At times, this might prove to be dangerous for the person having 1 % partnership...(Although that 1 % partner is not your client, i suppose)
Please try to weigh the cost of saving in terms of REGISTRATION with such 'would be' risks and liabilities AND accordingly take the decision.

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