Transfer of property on dissolution of firm

This query is : Resolved

Hiren Kareliya (Querist)
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01 April 2012 Facts of the case :

There are two persons, Mr A and Mr. B.

Mr. A and Mr B has purchased land in joint names. They formed a partnership in 1996 and transferred the joint owned land in the name of the firm through book entries only and not through sale deed, as a capital contribution.

They constructed 4 storey apartment on that land within 1 and half year. Most of the expenditure on construction was paid by Mr. B through further contribution of capital by him.

The firm sold One apartment in 1998 to third party. The seller was firm and registration document made by firm and signed by both partners Mr A and Mr B.

The 3 apartment left are shown as stock in trade in the books of the firm.

In 2003, the firm discontinued operations and closed the Bank Account held in the name of the firm. There was minor balance in the name of the firm which was withdrawn through self cheque at the time of closure.

The IT Return filed by the firm during FY ending 31/03/2003, with the following entries in Books of Accounts.

The 3 Apartment left as stock in trade are trasnferred to Mr. B through book entries only.
The Adjustment entries are routed through partners capital account.
No dissolution deed was filed with Department.

In 2006 Mr. B sold one of the 3 apartments. The lawyer of the third party insisted that firm name should not be included in the registration documents and as the land was in the joint name, Mr. A and Mr. B should sign the registration documents as seller.

As of today 31/03/2012 the two apartments are left.

My querry is,

Who owns the legal title of the apartment? Firm or Mr. B alone or Mr A and Mr B both?
Can these two apartments be trasferred to Mr. A by filing dissolution deed at present since the dissolution deed was not filed with the IT Department earlier, and will he get the legal title over the two apartment in his individual capacity with dissolution deed?

I f Mr. B jointly owns the legal title, then can he gift his share in the apartment to Mr. A through Gift Deed?

Is the transfer of Stock in trade by firm is transfer of immovable property, since the firm was engaged in the business of construction.

Please reply urgently...

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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08 April 2012 Draft the deed of dissolution and file with the department with a notice for discontinuation of the business.

As you have not transferred the land in the name of the firm it still stands in the name of both the partners. and both are equal partners. Sale deed is to be signed by both the partners and not by the firm.

If you give gift than gift tax will apply as both the partners are not relatives as per income tax act.