| Question And Answer | |
|---|---|
| Subject: | Capital contribution in LLP |
| Category: | Income-Tax |
| Querist: | Kanika Agrawal |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Capital contribution, Limited liability partnership, LLP |
| Date: | September 17, 2022 |
As per L&T agreement dated 18.09.2021 Mr. K Mrs. R (wife of Mr. K) and Mr. A became partners of the firms with capitals of Rs. 7 lacs.
The ratio of capital contribution and profit sharing ratio was 60%, 20% and 20% respectively.
The capital of 7 lacs upto 31.03.2022 was contributed by Mr. K and Mr. A.
No capital was contributed by Mrs. R (wife of Mr. K).
During F.Y. 2021-22 no business was carried on except purchase of land.
In F.Y. 22-2.3 the % of capital contribution and profit sharing ratio was changed with stitulation that the capital will be contributed by the partners in the new proportion as and when required.
Query:
- Since in F.Y. 21-22 Mrs. R (wife of Mr. K) had not contributed the capital what will be the consequences under the LLP Act?
- The amount of penalty if any?
- Whether it is advisable to pass a journal entry in F.Y. 21-22 transferring the requisite amount from Mr. K to Mrs. R (wife of Mr. K) ?
- Whether sec. 269SS of Income Tax will be applicable on the above entry? No tax Audit is Required in the case of LLP for F.Y. 21-22, since no business carried om in the relevant year.
As per section 33 of the Limited Liability Partnership Act, 2008 (LLP Act), a Partner is obligated to contribute money or other property or other benefit or to perform services for a limited liability partnership shall be as per the limited liability partnership agreement.
There is no specific penalty for such violation. As per section 74 of the LLP Act, any person guilty of an offence under this Act for which no punishment is expressly provided shall be liable to a fine which may extend to five lakh rupees but which shall not be less than five thousand rupees and with a further fine which may extend to fifty rupees for every day after the first day after which the default continues.
However, there shall not be an issue unless the other partner decides to make an issue out of it.