Capital gain urgent please guide me

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2016 if one firm "x " give assets and stock to "xy " (other relative partnership firm) at the time of dissolution of firm X
Is it possible ,if yes
then what will be tax liability on both firm

firm has transferred the assets and stock to other firm on book value.means they transferred and close the accounts of stock and assets. other firm will record this assets and stock on same value
no consideration is passed for this
capital gain is applicable,if yes then please give me section/circular/case laws etc. for supporting this

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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18 January 2016 Please explain -
The firm has transferred the assets and stock to other firm on book value then how it can be said that no consideration is passed for this ?
.
When X is under dissolution how the account of the firm XY will be squared off ?
.
The provisions related to capital gains in case of dissolution of a firm may be referred U/s 45(4).

Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2016 Sir, please u guide me
what should be treatment
firm 'x' has transferred assets and stock to 'xy' at book value
then what will be cost of acquistion (it will be book value)
as per sec 45(4) sale consideration will be fair market value as on the date of transfer
can we take book value as a fair value

so capital gain tax liability will be nil

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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18 January 2016 If the stock has been transferred at book value then business profit in respect to this transaction will be NIL. Stock is not a capital asset, so section 45(4) is not applicable.
However, if the firm carries construction business or engaged in real estate transactions for transfer of its stock in trade we have to refer Section 43CA.
.
But in case of Capital Assets of the firm X are transferred then as per s.45(4) it should be carried on at Fair Market Value. Suppose X transfers Land & Building to XY- whatever is its FMV or stamp duty valuation it should be carried out on that basis.
.

Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2016 sir,i understood stock treatment very well
firm carries business of ready and garments dresses
assets includes office furniture and equipments not land & building (including generator ,computer etc) wdv as on 31.03.2016 is Rs. 50,46,045

Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2016 paras sir, please guide me...

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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18 January 2016 Looking to the nature of assets, you can transfer the same on the basis of book value.