|Question And Answer|
|Answered by:||Advocate Shashi Ashok Bekal|
|Tags:||Capital Gains, death, partnership firm, Retirement of partner|
|Date:||April 5, 2022|
Firm with 2 partners A & B . A died on june 2020 B has taken C as a partner B & C has calculated the share of goodwill of A on the date of death. B and C decided to pay 50 lack in five years to the wife of deceased A whether the amendment made from 01/04/2020 is applicable in this case and any capital gain on this 50 lack is payable by the firm the goodwill amount calculated on death and paid to legal hair
There is no bar on the surviving partner entering into a partnership with the legal heirs of the deceased partner.
Where there are two partners and one dies, it is deemed to be dissolution of the Partnership Firm. The Hon’ble Supreme Court in the case of Mohd. Laiquiddin v. Kamala Devi Misra (Dead) by L.Rs. (2010) 2 SCC 407 placed its reliance on the decision of the Hon’ble Madras High Court in the case of S. Parvathammal (Smt.) v. CIT  163 ITR 161/ 23 Taxman 219 (Mad.) (HC) and held that when there are only two partners constituting the partnership firm, on the death of one of them, the firm is deemed to be dissolved despite the existence of a clause which says otherwise.
Therefore, there would be deemed dissolution.
Where payment is made to the legal heirs, not being a specified person, on account of dissolution of a firm will attract section 9B of the Act or not is a debatable issue. It can be argued that section 9B of the Act being a deeming provision has to be interpreted strictly and thus the term “specified person” cannot include legal heirs.