2.
In the above case stated by Mr.Basavaraj, assuming the firm was making profits and the retiring partner was given amount more than what is being credited to his capital account , on account of following situations;
1) Siuation1: The excess payment was due to revaluation of Assets and there was no clause in the Deed of Partnership as to revaluation of assets.
2) Siuation2: The excess payment was due to computation of Goodwill paid to the retiring partner and there is no such clause in the partnership deed as to payment of such Goodwill.
My qestion in the above stated case is:
a) Taxability in respect of amount received by the retiring partner and whether such excess payment made to retiring partner by firm is allowed as deduction in the hands of the firm or will be treated as capital payment and hence not allowed as deduction. Further, if it is treated as capital payment then, will such amount be capitalized as asset or distributed to capital accounts of the gaining partners.
b) Having a clause for payment of Goodwill to retiring partner is pre-requisite to pay good will to the retiring partner.
Please resolve Mr.Mohan S sir.