Section 331 — Liability of partners of limited liability partnership in liquidation. Successor to s.167C of the 1961 Act.
Section 331 is in Chapter XVII — Special Provisions Relating to Certain Persons, which runs from section 302 to section 355.
The section makes every person who was a partner of a limited liability partnership at any time during the relevant tax year jointly and severally liable for tax due, notwithstanding anything in the Limited Liability Partnership Act, 2008. It operates where any tax, including penalty, interest, fee or any other sum payable under the Act, is due and cannot be recovered from the limited liability partnership in respect of any income of any tax year, or from any other person in respect of income of a tax year during which that other person was a limited liability partnership. The liability does not attach if the partner 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.
Limited liability is the point of the vehicle, and without an express override a partner would be beyond reach for the entity's tax however the shortfall arose. The section pierces that only for the Act's own dues, and only after recovery from the entity has failed, so it is a collection provision of last resort. The defence keeps it aimed at partners whose conduct explains the non-recovery rather than at every name on the register.
Two conditions must be satisfied before a partner is reached: the sum must be due, and it must be one that cannot be recovered from the limited liability partnership or the other person in clause (b). The liability then covers penalty, interest, fee and any other sum payable under the Act, not just tax, and is joint and several, so the whole amount may be recovered from any one partner. Exposure turns on membership at any time during the relevant tax year, so resigning before the demand was raised does not help. The defence puts the burden on the partner and is framed negatively. Note also that although the heading speaks of liquidation, the operative words apply wherever the sum is due and cannot be recovered.
A limited liability partnership is assessed to tax, interest and penalty of Rs. 90 lakh and the amount cannot be recovered from it. Two persons were partners at some point during that tax year, one of whom retired part-way through. Both are within the section and each is jointly and severally liable for the whole Rs. 90 lakh. The retired partner escapes only if he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part.
You meet this section as a recovery proceeding directed at you personally after the limited liability partnership's demand has gone unpaid. It is not a filing or assessment provision; it surfaces at the collection stage.
Irrespective of anything contained in the Limited Liability Partnership Act, 2008 (6 of 2009)
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
See the full 1961 to 2025 concordance.