Section 331: liability of partners of an LLP in liquidation

What Section 331 says

"Irrespective of anything contained in the Limited Liability Partnership Act, 2008 (6 of 2009), where any tax including penalty, interest, fee or any other sum payable under the Act is due and cannot be recovered from-- (a) the limited liability partnership in respect of any income of any tax year; or (b) any other person in respect of any income of any tax year during which such other person was a limited liability partnership, then, in such case, every such person who was a partner of such limited liability partnership at any time during the relevant tax year, shall be jointly and severally liable for the payment of such tax due unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership."

How the liability and the defence work

This section applies whenever tax, penalty, interest, fee or any other sum payable under the Act relating to an LLP's income cannot be recovered from the LLP itself (whether the LLP still exists in that form, or was an LLP during the relevant tax year).

Every person who was a partner of the LLP at any time during the relevant tax year is jointly and severally liable for the unrecovered amount.

A partner can escape this liability only by proving that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on their part in relation to the affairs of the LLP - the burden of proof is on the partner, not the tax department.

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