We all are aware that the settlement of retiring partner from a partnership firm is not an easy task. The journey, the ups and downs, the emotions involved, the timing of retirement and various other factors are evidently enough to create a tense environment between the retiring partner and continuing partners. To add fuel to the fire, the taxation issues also contribute a lot to this uphill task.

On the income tax side, in our previous articles, we have addressed the issues, pre and post insertion of new Section 9B and Section 45(4). The new insertions have provided certain respite but has not taken away the complete strain. May be in coming years, the incidental and ancillary issues surrounding that will also be resolved, paving way to more clarity. On the GST side, the issues started to crop up, mainly due to inadequate legislature. In this article, we will try to raise certain important issues on that front.

Read more: Retiring Partner and Partnership Firm – Certain GST Issues

History:

Prior to introduction of Benami Transactions (Prohibition) Act in 1988, the benami transactions were recognised as a specie of legal transactions pertaining to immovable properties. The nature of a benami transaction has been described by the Judicial Committee of Privy Council in Gurnarayan v Shoelal Singh[1], thus –

The system of acquiring and holding property and even of carrying on business in names other than those of the real owners, usually called the benami system, is and has been a common practice in the country ….. The rule applicable to benami transactions was stated with considerable distinctness in a judgment of this Board delivered by Sir George Farewell. Referring to a benami dealing, their Lordships say: It is quite objectionable and has a curious resemblance to the doctrine of our English law that the trust of the legal estate results to the man who pays the purchase money, and this again follows the analogy of the common law that where a feoffment is made without consideration the use results to feoffer.

Read more: Prohibition of Benami Transactions Act – Applies Prospectively – SC in Ganpati Dealcom Private...

Introduction:

Issue of Notice under section 148 of ITA[1] after 31.03.2021 under old provisions has created a buzz in the reassessment matter in recent times. Finally, the matter reached the Supreme Court in the case of Ashish Agarwal[2] and CBDT[3] has issued an instruction[4] to implement the decision of Supreme Court. For detailed analysis of the above issue, read our article here[5].

When the above issue is taking the discussion at various judicial fora, parallelly, one more issue has stood up and raised its voice to make a big impact in the reassessment controversy.

Section 149 (old provisions as well as amended provisions) states that the Notice under section 148 shall not be ‘issued’ after the expiry of time limit specified in section 149 for making the reassessment under section 147.

Read more: Determination of Date of Issue vis-a-vis Various modes of Issue of Notice – Delhi HC in Suman Jeet...

In this 99^th edition, we bring you articles covering the recent pronouncement of Supreme Court in Ganapati Dealcom, where in it was held that the benami transaction (prohibition) act is applicable prospectively and not retrospectively. This is a landmark judgment, since it puts rest to all the proceedings initiated before the enactment of amendment act in 2016.

The next article is on the issues that would arise under GST laws when a partner retires from the firm by taking the exact amount that was lying to credit of his capital and current account and in instances where he takes more than that. Though the said issues were covered by the new sections in the income tax act, the position under GST laws is unclear as of now. Hence, there is a requirement for the Central Government to formulate provisions or give clear instructions before the litigation crops up.  

The next article is on the determination of date for issuance of notice under income tax act for the purposes of Section 148. The Delhi High Court has framed five scenarios under which the date of issue of notice needs to be determined. Though it is held that such notices are to be treated as issued after 1^st April 2021, being time barred for carrying the assessment/re-assessment, the same is saved by the Supreme Court’s judgment in Ashish Agarwal, wherein it was held that such notices to be treated as valid. However, the Delhi High Court’s judgement will be pretty useful for future issues.

I hope that you will have good time reading this edition and please do share your feedback. I will also urge clients to mail us topics or issues on which you want us to deliberate in our future editions, so that we can contribute to the same.

Key Topics:

GST

• RETIRING PARTNER AND PARTNERSHIP FIRM – CERTAIN GST ISSUES

DIRECT TAX

• PROHIBITION OF BENAMI TRANSACTIONS ACT – APPLIES PROSPECTIVELY – SC IN GANPATI DEALCOM
• DETERMINATION OF DATE OF ISSUE VIS-A-VIS VARIOUS MODES OF ISSUE OF NOTICE