• Accounting for acceptance of capital from uncle in partnership

1:My uncle (fathers real brother) was partner 50:50 profit /loss in a firm.

2: uncle retired and I (son of remaining partner) included in existing p. deed with same profit and loss sharing ratio. 

3: wish to accept my uncle's (outgoing partner) capital as gift and transfer the same as my capital(100%) in the same firm. 

4: Is it legally possible?, what are the tax implication for incoming / outgoing partner and for the firm.
Asked 7 years ago in Business Law

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6 Answers

1) uncle can execute gift deed for transfer of his capital to you

2) you have to pay stamp duty as per stamp duty act of your state

3) gift deed should be registered

4) consult a local CA

Ajay Sethi
Advocate, Mumbai
95217 Answers
7611 Consultations

5.0 on 5.0

1. oNCE YOUR UNCLE RETIRES HIS SHARE EXPIRES.

2.The same can not be transferred to subsequently.

3.However you can be indicted as holding majority partner share but 100& owning of share means the other partner is redundant and then the firm becomes anything but partnership firm.

4. So if there is clause in the partnership deed of transfer of share then you can get share of your uncle but you can not become its sole owner and if you do then it becomes proprietorship firm.

Devajyoti Barman
Advocate, Kolkata
22920 Answers
498 Consultations

5.0 on 5.0

Gift deed has to executed when transfer of capital has been done in your favour

2) uncle can execute relinquishment deed to relinquish his share in capital

Ajay Sethi
Advocate, Mumbai
95217 Answers
7611 Consultations

5.0 on 5.0

1. Since it is moveable proeprty the execution of gift deed is optional. IR ANY IMMOVABLE PROPERTY IS INVOLVED THEN REGISTERED DEED IS COMPULSORY.

2. If he is transferring the share then his NIC is enough or the gift deed.

Devajyoti Barman
Advocate, Kolkata
22920 Answers
498 Consultations

5.0 on 5.0

Section 29(2) of partnership act says tht:

If the firm is dissolved or if the transferring partner ceases

to be a partner, the transferee is entitled as against the remaining

partners to receive the share of the assets of the firm to which the

transferring partner is entitled and for the purpose of ascertaining that share, to an account as from the date of the dissolution.

You can become the transferee to receive the rights of the outgoing partner who would transfer the same to you.

The tax implication would be as per the provisions of law in this regard which the partnership company/firm will handle through their auditor.

T Kalaiselvan
Advocate, Vellore
85416 Answers
2239 Consultations

5.0 on 5.0

1: is it compulsory to execute this gift dead in same FY in which the partnership constitution has changed (AY 2017-18) or it can be done in subsequent years also.

If the outgoing partner s\would desire to transfer his rights in the firm as a gift deed to you, then it can be done before you become the partner

2: what is the alternate to finish outgoing partner's capital, without paying him as the business division is within family.

The terms are set out in the partnership deed and the articles of association which can be enforced under such circumstances.

T Kalaiselvan
Advocate, Vellore
85416 Answers
2239 Consultations

5.0 on 5.0

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