Applicability of Sec.56

[Ethirajan Parthasarathy]

A partner at the time of retirement receives some amount over and above his credit balances. There are quite a few decisions that excess amount received is not subject to Capital Gain tax. My query is whether such excess amount can be brought to tax by the dept. u/s 56.

AI Summary

Retired partner's excess payout may be taxed as 'other income' under Section 56, not as Capital Gains. A partner, upon retirement, receives an amount exceeding their credit balance. There are several decisions suggesting that this excess is not subject to Capital Gains tax. The query raised is whether this excess can be taxed under Section 56. The response suggests that this excess amount may be considered as 'other income' for the purposes of the Income Tax Act.