| Question And Answer | |
|---|---|
| Subject: | Partnership Firm |
| Category: | Income-Tax |
| Querist: | Prakash Kulkarni |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | partnership firm, profit sharing ratio |
| Date: | October 4, 2022 |
Assessee is partnership firm having two partners. The firm has purchase two immovable properties and they are in the name of the firm. The partners have decided to develop the one of the property and since they were short of funds and necessary infrastructure, they have decided to admit two new partners who will bring the necessary capital as well as ready to work as working partner for development of property No. 1. The profit sharing ratio is also decided to be equal as the incoming partner are bringing the necessary capital as per their profit sharing ratio.
They have decided to provide the clause in the partnership deed that the incoming partners will not have interest in the Property No. 2 owned by the partnership firm.
If the original partners decided to sale the property No. 2 , then the profit on the sale will be share between the original partners only and tax on the same also debited to their capital account.
Issue:-
- Whether this partnership is valid as per partnership Act.
- whether there are any tax liability under Income tax , stampduty etc. on the firm or partners because of this drafting of partnership?
The Law on Partnerships is governed by the Law of Contracts. Therefore, the partnership is valid in the eyes of the law. There will be no implications under the Income-tax Act or Stamp Duty Act on the firm or the partners for drafting such an agreement.