Query)

One of my client’s father had a partnership firm with his wife.

His father had died in August 2020 due to Corona but the business is run under the same GST number of the firm till now.

 If there is a clausebin the partnership firm that on the death of the any of the partner, the firm shall not be dissolved and shall be continued by taking the legal heir of the deceased as partner then the firm may be continued by taking the legal heir and executing the new partnership deed. However, if there is no such clause then one may consider following opinion:

1. As per supreme Court decisions , in respect of partnership firm with only two partners, on death of one partner, autonomic dissolution attract.  One can refer Commissioner Of Income-Tax, … vs Seth Govindram Sugar Mills Ltd on 26 March, 1965. The copy of the said judgment is attached herewith.

2.  As per Sec 42 of  the Indian Partnership Act when there are two partners and one dies then the Firm automatically gets dissolved.

3. From Income tax point of view, ideally one need to file a Return for Income up to the date of death of course on the due date for that year.

4. There is no need for Dissolution deed or intimation to the Dept  but one can mention it in the Tax audit report regarding closure in Form No. 3CA.

5. From GST perspective, Firm may raise an Invoice with GST on the stock and sell it to the successor who will continue the business. The successor can take ITC.

This views are the personal views of the author and the readers are advised to independently ascertain and verify the tax implications. Comments and suggestions of readers are invited for the mass benefit of all.