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Weekend MCQ Self Challenge #13 – Assessment of Firms and Liabilities of Partners

 

Assessment of Firms and Liabilities of Partners

 

Dear Professional Seniors & Friends,
Welcome to this wonderful weekend MCQ self challenge!

This weekend challenge is on Assessment of Firms and liabilities of partners under different circumstances having 5 MCQs to be self answered by participants to take self challenge. The detailed answer of these MCQs shall be posted on Monday for the self assessment of the participants. This post shall be of immense use of the participant.

Weekend MCQ 13.1: From the firm M/s ABC, Mr. C retires on 30.06.2017. Which among the following is correct in relation to assessment of firm and liability of partners for previous year 2017-18?

(A) Assessment shall be made on Firm M/s ABC, and Partners A & B will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(B) Assessment shall be made on Firm M/s AB, and Partners A & B will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(C) Assessment shall be made on Firm M/s ABC, and all Partners A, B & C will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(D) Assessment shall be made on Firm M/s AB, and all Partners A, B & C will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

Weekend MCQ 13.2: What if in the above question, Mr. D admits as partner on 30.06.2017 and Mr. C did not retires?
(A) Assessment shall be made on Firm M/s ABCD, and Partners A, B & C will be jointly and severally liable along with firm for any tax, penalty or other sum payable.
(B) Assessment shall be made on Firm M/s ABC, and Partners A, B & C will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(C) Assessment shall be made on Firm M/s ABCD, and all Partners A, B, C & D will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(D) Assessment shall be made on Firm M/s ABC, and all Partners A, B, C & D will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

Weekend MCQ 13.3: From the firm M/s ABC, Mr. A, Mr. B and Mr.C retires on 30.06.2017 and Mr.D, Mr.E and Mr. F are admitted. Which among the following is correct in relation to assessment of firm and liability of partners for previous year 2017-18?

(A) Assessment shall be made on Firm M/s ABC, and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(B) Assessment shall be made on Firm M/s DEF, and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(C) Separate assessment shall be made on Firm M/S ABC for the period 01.04.17 to 30.016.17 and on M/S DEF for the period 01.07.17 to 31.03.18 and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(D) Separate assessment shall be made on Firm M/S ABC for the period 01.04.17 to 30.016.17 and on M/S DEF for the period 01.07.17 to 31.03.18 and Partners D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

Weekend MCQ 13.4: Which of the option is correct in relation to assessment of firm and liability of partners for previous year 2017-18 as per following scenario?

 M/s ABC becomes M/s DBC on 30.06.2017
 M/s DBC becomes M/s DEC on 30.09.2017
 M/s DEC becomes M/s DEF on 31.12.2017

(A) Assessment shall be made on Firm M/s ABC, and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(B) Assessment shall be made on Firm M/s DEF, and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(C) Separate assessment shall be made on Firms according to their period and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(D) Separate assessment shall be made on Firms according to their period and all Partners D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

Weekend MCQ 13.5: From Firm M/s AB, Mr. A retires. Which among the following is correct in relation to assessment of firm and liability of partners for previous year 2017-18?

(A) Assessment shall be made on Firm M/s AB, and Partners A, B only will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(B) Assessment shall be made on Partner B only, and Partners A & B will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

(C) Assessment shall be made on Firm M/s AB, and Partner B will be jointly and severally liable along with firm for any tax, penalty or other sum payable.
(D) Assessment shall be made on Partner B only, and Partner B only will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

Sincere Regards
CA Sanjay Kumar Agrawal
Mobile: 9810116321
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Answer MCQ Self Challenge # Weekend Dhamaka

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on the provisions relating to assessment of firms and liabilities of partners under different circumstances.

 

Answer to MCQ 13.1 : D)

Answer to MCQ 13.2 : C)

Answer to MCQ 13.3 : C)

Answer to MCQ 13.4 : B)

Answer to MCQ 13.5 : A)

 

The provisions relating to assessment of firms and liabilities of partners under different circumstances are discussed and summarised in the following table –

 

CaseAssessmentLiabilities
Change in Constitution of firm(retirement, admission of partner or change in profit sharing ratio)Section 187 – Assessment shall be made on the firm as constituted at the time of making assessment.Section 188A – All partners who during the previous year were partners shall be jointly & severally liable along with the firm.
Succession of one firm by another firmSection 188 – Assessment shall be made according to time period of firms remain in force i.e.

1) Predecessor firm shall be assessed upto the date of succession.

2) Successor firm shall be assessed after the date of succession.

Section 188A – All partners who during the previous year were partners shall be jointly & severally liable along with the firm.
Firm dissolved or business discontinuedSection 189(1) – Assessment shall be made on the firm as if no such discontinuance or dissolution had taken place.Section 189(2) – All partners who during the previous year were partners shall be jointly & severally liable along with the firm.

 

 

Practical Analysis for MCQ 13.1 & 13.2

 

  • These both questions are the case of change in constitution of firm so assessment shall be as per Section 187 i.e. on the firm as constituted at the time of making assessment.

 

  • Liabilities of partners shall be govern by Section 188A i.e. all the persons who were partners during the previous year shall be jointly & severally liable along with the firm.

 

  • Based on the above analysis, correct answer to MCQ 13.1 : D) Assessment shall be made on Firm M/s AB, and all Partners A, B & C will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

 

  • Correct answer to MCQ 13.2 : C) Assessment shall be made on Firm M/s ABCD, and all Partners A, B, C & D will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

 

 

Practical Analysis for MCQ 13.3

 

  • This is a case of succession of one firm by another firm so assessment shall be as per Section 188 i.e.

 

Predecessor firm shall be assessed       upto the date of succession

Successor firm shall be assessed        after the date of succession

 

  • Liabilities of partners shall be govern by Section 188A i.e. all the persons who were partners during the previous year shall be jointly & severally liable along with the firm.

 

  • Based on the above analysis, Correct answer to MCQ 13.3 : C) Separate assessment shall be made on Firm M/S ABC for the period 01.04.17 to 30.016.17 and on M/S DEF for the period 01.07.17 to 31.03.18 and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

 

 

Practical Analysis for MCQ 13.4

 

  • In this case, all the partners retires at different dates and new partners admits at same date.

 

  • This is not a case of succession. This is a case of change in constitution of the firm and section 187 shall apply. Assessment of P.Y. 2017-18 shall be made on the reconstituted firm M/s DEF and the liabilities of the partners shall be governed by Section 188A.

 

  • Based on the above analysis, correct answer to MCQ 13.4 : B) Assessment shall be made on Firm M/s DEF, and all Partners A, B, C, D, E & F will be jointly and severally liable along with firm for any tax, penalty or other sum payable because

 

 

Practical Analysis for MCQ 13.5

 

  • In this question Partner A retires, and Firm M/s AB has to dissolved since for a firm, two partners must be there.

 

  • This is a case of dissolution of firm so assessment shall be made as per provisions of Section 189 means on Firm AB as if no such dissolution had taken place as discussed in table above.

 

Based on the above analysis, correct answer to MCQ 13.5 : A) Assessment shall be made on Firm M/s AB, and Partners A, B only will be jointly and severally liable along with firm for any tax, penalty or other sum payable.

 

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)

 

Sincere Regards

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
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