Urgent solution needed for this case law

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CA CS
81 Points Joined January 2010

Hey Friends,

I really need guidance in the following case:

CASE FACTS:

  • A partnership firm consisted of 3 partners.
  • They bought, using the firm money, land for the firm ( thus it becomes Property of the Partnership Firm u/s 14 of IPA 1932)
  • ONE partners retired.
  • New partnership deed was framed & registered.
  • IT Dept sent demand to remaining partners to pay stamp duty on transfer of property from retiring partner to the remaining partner.

(It assumed that property of partnership firm is same as that of partner. Hence on change in constitution, the same property which earlier belonged to 3 partners now belonged to 2 partners thus leading to transfer of property. Therefore stamp duty must be paid by remaining partners.)

QUERRY:

The aim of the assessee is to avoid this payment of stamp duty.

What are the relevant sections or case laws that may prove:

·         This is not a transfer?

·         The property of the partnership firm is not same as that of the partner?

 

 

PLSSSS  GUIDE WITH YOUR VALUABLE SUGGESSIONS….

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On 12 October 2011 at 21:41 Report
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Associate
50 Points Joined April 2010
IT dept can not send demand notice for recovery of stamp duty. :) Further even if 1 partner retires the property remains in name of firm, for which stamp duty is already paid at the time of registn.
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On 12 October 2011 at 21:52
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CA CS
81 Points Joined January 2010

I also beleive that...

 

But the IT dept has done it using the concept that partnership is not a legal entity... hence property of the firm is same as that of the partners... so earlier the property which belonged to 3 partners, now belongs to just two. Hence a transfer has taken place and so stamp duty is payable on the 1/3rd property of retiring partners by remaining partners in ratio 1/6 : 1/6

 

Are there any section/ case laws/ relevant provision in the Transfer of property Act or the Stamp Act to help the assessee???

 

PLSS GUIDE...

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On 12 October 2011 at 22:17
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Associate
50 Points Joined April 2010
I think Transfer of property will take place at the time of dissolution, but this is not the case in your issue. Further, Simply bcoz the share of the partners hav increased after retirement of 1 partner, there is no escape of income. Hence IT in this case can not interfere by sending demand for stamp duty, which it otherwise also can not send. sec 2 (47) for defination of 'transfer' can be refered.
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On 12 October 2011 at 22:34
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CA CS
81 Points Joined January 2010

Rajesh i have another querry which may be relevant to the above case. i've searched on net but can't haven't yet found anything:

 

 

As per the RAJASTHAN STAMP ACT 1988

Whether any Stamp Duty is payable on the transfer of property affected by retirement of partner causing reconstitution of partnership???

 

In Maharashtra & Gujarat such stamp duty is leviable... but i am not sure about Rajasthan ( where the case belongs)?

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On 14 October 2011 at 09:47
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Associate
50 Points Joined April 2010
@ Yogita, no idea on Rajasthan stamp act. But, i think stamp duty will get leviable if there is change in ownership that is registered with state govt. However, at the time of retirement of 1 partner, property remains in the name of firm. Since thrs no change is ownership, stamp duty cant be leviable. May be other CCI friends can contribute on this..
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On 14 October 2011 at 10:23


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