CAPITAL GAINS FOR RETIREMENT OR DISSOLUTION OF PARTNERSHIP

[murtaza hussien]

CAPITAL GAINS TAX ON RETIRMENT / DISSOLUTION OF PARTNERSHIP

Mr. A has Capital A/c of ₹ 15,00,000. His share in the assets of the firm comes to ₹ 80,00,000/-

Case 1.

He retires from the firm and he receives ₹ 25,00,000 in cash and balance 55,00,000 in a godown (property in name of firm) transferred to Mr. A. Cost to firm ₹ 20,00,000/-.

Would the firm have to pay capital gains tax u/sec 45 on 55lacs-20lacs on property transferred and also on the 25lacs - 15 lacs , excess given to partner on his capital account

What if the firm, revalues the godown before dissolution and makes book entries. is this legal and allowed by ITO

CASE 2

Same as above, but dissolution. the three partners all take ₹ 80lacs consisting of cash and property. Their capital account is ₹ 15 lacs each.

Would the firm be liable to pay tax on all the transfer of properties.

CASE 3

All partners are brothers. Can a family settlement be made and properties transferred before MR. A retires from partnership.

The firm is based in Thane Dist.Maharashtra and all partners reside in Thane.

AI Summary

Exploring Capital Gains Tax: Implications for Retiring Partners and Dissolving Partnerships, Including Asset Revaluation and Distribution. A discussion on capital gains tax implications for a partner retiring or a partnership dissolving. In Case 1, Mr. A retires and receives cash and property exceeding his capital account, raising questions about the firm's tax liability on the excess and property transfer. It queries if revaluing assets before dissolution is legal. Case 2 involves dissolution with equal asset distribution among partners, questioning tax obligations on property transfers. Case 3 explores if a family settlement can precede retirement. The firm is located in Thane, Maharashtra. The reply seeks clarification on whether the issue was resolved.