Admission cum retirement in case firm

[shyam mhaskar]

In case of a partnership firm with two partners, whether the admission of two new partners and at the same time retirement of the old two partners could be possible. What could be the effect from the point of view of income tax, if the firm is having any immovable property in its fixed assets such as office premises, etc. Whether such arrangement is possible to keep partnership firm in existence. OR Whether such admission cum retirement may be held / treated as dissolution  by any revenue department such as income tax, excise, vat, etc.

[DR.MARIAPPAN GOVINDARAJAN]

It is depending upon your partnership agreement. If there is no agreement as to the effect of retirement of partners, the partnership will be dissolved on retirement. If there is a clause that the partnership will continue even if any of the partner retires, then it will exist and the new partners may be included by inserting to the ratio of the liability/profit sharing.

AI Summary

Admitting New Partners as Existing Ones Retire: Impact on Partnership Continuity and Tax with Immovable Assets In a partnership firm with two partners, there is a query about the feasibility of admitting two new partners while the existing two partners retire simultaneously. Concerns are raised regarding the implications for income tax, particularly if the firm holds immovable property as a fixed asset. The response indicates that the outcome depends on the partnership agreement. If the agreement lacks a clause for continuation upon a partner's retirement, the firm will dissolve. However, if there is a clause allowing continuation, the firm can persist, and new partners can be admitted by adjusting the liability/profit-sharing ratio.