Budhan Chandra (business) 19 July 2018

Partnership property

Two people are joint equal owners of a business property under a HUF in which they are the two coparceners.

They decide to partition away this business property by apportioning a share capital of equal value to each of them which is then reflected in the book of accounts in a partnership they have subsequently formed. A section 171/3 ruling is also received confirming that the partition has duly taken place.

The partnership has continued for 50 years and the audited books of accounts of the firm reflect the land value, machinery and other assets.

However, the land documents/ jamabandi still shows the two people only.

So my question is - does the land belong to the partnership or does it belong to the partners?

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2 Replies

G.L.N. Prasad (Retired employee.) 20 July 2018

The land continues to be in individual names and recitals in absence of any registered agreements to the contrary.

Budhan Chandra (business) 20 July 2018

The following were deeds/agreements registered:

1. The Partnership Deed itself which states: "And Whereas the family business capital was partitioned through the books of accounts on... And Whereas, after partition of the Hindu Undivided Capital in the business, with a view to ensure better management of the business and to avoid future disputes and differences among themselves, the parties hereto have mutually agreed to continue the business in partnership"

2. A family Deed of agreement which states the same but also adds in further narration that "the business was converted into a partnership"

The land taxes/rates/khazana being paid in the name of the firm as well as mortgages/loans/ taken from banks against the security of the propoerty also taken in the name of the firm.