Partnership huf
sanjeevkhandelwal
(Querist) 22 December 2015
This query is : Resolved
Dear Member,
Let me Know the remedy on Partnership
Suppose A (Individual) and B (HUF) are partner in a firm. Firm itself assesses having PAN ,TAN & TIN
B (HUF) dies
what the further procedure for a firm
Can it run as usual coz die partner are Karta of HUF ( we Changing karta of HUF ) My opinion is that HUF can not die only partition are possible
Firm held only two partner one is individual and second was HUF
After die of karta of HUF partner can firm run with another member of HUF (as Karta ) with same PAN and TAN or it close Partnership firm with the immediate death of HUF Partner
Can partnership deed amended( taking New Karta of HUF ) or it make new one can avail new PAN & TAN no please suggest
sanjeevkhandelwal
(Querist) 22 December 2015
Dear Member,
Let me Know the remedy on Partnership
Suppose A (Individual) and B (HUF) are partner in a firm. Firm itself assesses having PAN ,TAN & TIN
B (HUF) dies
what the further procedure for a firm
Can it run as usual coz die partner are Karta of HUF ( we Changing karta of HUF ) My opinion is that HUF can not die only partition are possible
Firm held only two partner one is individual and second was HUF
After die of karta of HUF partner can firm run with another member of HUF (as Karta ) with same PAN and TAN or it close Partnership firm with the immediate death of HUF Partner
Can partnership deed amended( taking New Karta of HUF ) or it make new one can avail new PAN & TAN no please suggest
sanjeev kumar goel
(Expert) 23 December 2015
Dear Sanjeev Khandelwal,
You are right HUF never dies only the Karta changes after the death of present Karta. Your query is related with partnership. If a firm is doing business under partnership of an individual and HUF then there is no problem if the karta of the HUF dies as the other senior member of HUF automatically becomes Karta of HUF and there is no effect on the status of Partnership Firm. The partnership firm shall continue with its original PAN, TAN, TIN etc. Only you can do to make simply a declaration on stamp paper regarding appointment of new Karta of Huf after the death of original karta. Your firm will not be dissolved nor there is need to close the firm or to make new partnership firm on the ground of death of karta of HUF partner.
Rajendra K Goyal
(Expert) 23 December 2015
Amended partnership deed can be executed with new Karta. Matter has to be reported to taxation authorities.
Suhail A.Siddiqui
(Expert) 23 December 2015
Since, HUF never die, therefore after the death of Karta partnership firm will not automatically dissolve (like partner's death).There is no need to write new/ amended partnership deed.
Partnership will continue, only new KARTA will replace with old.
sanjeevkhandelwal
(Querist) 24 December 2015
Dear All,
In the above case i understand like that
in concern of Income Tax " person " mean Individual or HUF SEC 2(3) t is absolutly right
HUF means association of person whose not legal perpetual existance , mean status of HUF are not separate from its member( Like Company )
In partnership, Karta of HUF sign in Deed with Individual Capacity coz as per Indian Partnership Act and Indian contract act does not allow HUF Due to its leagal disablity
Meaning of Person in both Law are Different
Hence I think in above case partnership firm automatically closed
Please suggest can i right or wrong
Dr J C Vashista
(Expert) 25 December 2015
Dear Sanjeev Khandelwal,
I agree with you HUF and partnership are two different legal connotations, as explained by you.
In the event of death of Karta the next senior most member of the family shall automatically become Karta.
However, you are right and I fully agree, for a partnership firm (registered under Indian Partnership Act)or unregistered it comes to an end when one of the two partners die without having a substitution clause in the Memorendum and Articles of Association and the new member steps into the shoes of deceased partner.
K.S.Srinivas
(Expert) 26 December 2015
Effect of death of partner in the partnership firm:-
In a landmark judgment, in Mohd Laiquiddin v Kamala Devi Misra (deceased) by LRs,(1) the Supreme Court has ruled that on the death of a partner of a firm comprised of only two partners, the firm is dissolved automatically; this is notwithstanding any clause to the contrary in the partnership deed. The court found that Section 4 of the 1932 Partnership Act defines a 'partnership' as a contract between more than one person (since it uses the term 'persons'). Therefore, if in a firm comprised of only two persons as partners one dies, the contract comes to an end. There cannot be any contract unilaterally without acceptance by the other partner.
sanjeev kumar goel
(Expert) 28 December 2015
Mr K.S.Srinivas it is right that Honb'le Supreme Court has decided that where there are only two partners then on the death of one partner of the firm the partnership firm shall be dissolved but here the case is different as the other partner is HUF not an individual and it is a a clear fact that HUF can neither be created nor dissolved. HUF is life long and even the unborn child is also the member of HUF. HUF is governed by its Karta, who is the eldest member of the HUF. In case of death of the Karta of HUF, the existence of HUF does not lost. The other senior most member of the HUF becomes Karta of the HUF automatically and HUF always remains in existence. So the existence of HUF is a continuous process. If any HUF enters into any partnership with any individual and the Karta of HUF dies then the partnership would not dissolve as the HUF is still in existence through its new Karta. So the judgment of Honb'le Supreme Court in the case of Mohd LAiquiddin V/S Kamla Devi does not apply here as there were two partners in their individual capacity and if an individual dies then his or her existence vanishes and all the contracts and agreements made by him or her becomes invalid and void after his or her death.
sanjeev kumar goel
(Expert) 28 December 2015
Dear Sanjeev Khandelwal you are wrong as the Karta of HUF when signs any document or contract or agreement or enters into any partnership, he always signs for and on behalf of members of HUf in the capacity of Karta of HUF not in the individual capacity. So in your case the partnership will never dissolved until the willingness of the other partner or the remaining members of HUF to do so.
sanjeevkhandelwal
(Querist) 30 December 2015
Dear Goelji,
you are right in other cases like Incometax but In Partnership you are wrong
At the time of Partnership Deed Registration we take "person " as a Individual but effect on record as Karta of HUF
This was Mistake and it did by mostly
No problem arise where three or more partner there
Registered Partnership did not allow HUF
You see in LLP where Strictly disallow HUF
In Income Tax HUF treated as Partner coz sec 2(3) define person Individual as well as HUF as same
But at the Time of Agreement of Partnership(under Indian Partnership Act & Under Indian contract Act) it does not allow Karta as partner coz karta are incapable in terms of "Person" karta are not legal entity he is only member of HUF
and Finally,
Karta of HUF neither eligible for remunaration nor treated as working partner as per Income Tax Act what thats means, Because Status are not Individual
T. Kalaiselvan, Advocate
(Expert) 02 January 2016
I agree with the author's opinion about the partnership dissolution on the death of HUF partner. Now since you know the law involved in it, what is your query?
