IQBAL SINGH (PROPRIETOR) 24 April 2012

Retirement of a partner from a partnership firm

A partnership firm in which two sons and father are partners. The land is in the name of firm. One of the son (partner) wants to retire. As per family settlement some other property differently located not related with the concerned firm goes to the retiring partner and in lieu of that share of retiring partner in the firm is to be given to the other son partner in the firm. Is any monetary transaction required or simply it be mentioned in the dissolution deed? Any stamp paper, or any other document is required? Is there any government fee or duty involved? Is there any capital gain as the share of the retiring partner in the property of the said firm is taken as lump sum and settled against the other property located at different place which is to be transferred to the retiring partner. Though the firm will be in continuation. If it so happen at anytime in future that the firm sells its property then the signature of retiring partner will be required for the registered deed as in originally in the registry of the firm land all the three partners were signatory. Will the simple power of attorney is suffice or no need of power of attorney as the new partnership deed will be written. Kindly guide.

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4 Replies

S Jadhav 98336 98330 (Jadhav & Associates) 25 May 2012

The judicial principle is that for any property or service taken there is a consideration involved and the consideration should be paid by the person involved.

So in your case if the property is given in lieu of the partner's share, then the retiring partner's share will be assumed to be bought by the person who has given the retiring partner the property (obviously the property should be in the new partnership share acquirer's name. Also stamp duty and registration has to be compusorily done for such an agreement.

Capital Gains tax will arise if there are capital gains, e.g. the property purchase price would be x while the current market value would be y. If the indexed value of x tilldate is lower than y, then capital ains has to be paid.

S Jadhav

Adv Rohit Dalmia 9324538481 (Lawyer) 25 May 2012

if you want to sell the property of the partnership firm then you need not take the signature of the retiring partner as the deed of retirement of partner would automatically terminate the right of the retiring partner in the said property of the firm.

in case of any query kindly contact Adv. Rohit Dalmia on 09324538481 at mumbai.

S Jadhav 98336 98330 (Jadhav & Associates) 29 May 2012

I think the query is not about extinguishing the right of the retiring partner but to give him another property owned by a family member of the retiring partner.

You may carry out the transaction in two parts on the same day. Also if the concerned persons are related as per the tx laws, then you may use the stamp duty of 2% applicable on gifting properties to relatives to save stamp duty. This can be done easily and do remember to do all transactions by way of registered documents.

S Jadhav

S Jadhav 98336 98330 (Jadhav & Associates) 29 May 2012

I think the query is not about extinguishing the right of the retiring partner but to give him another property owned by a family member of the retiring partner.

S Jadhav