Capital gains tax on distribution of assets to partners

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2012 Dear Experts, one of my client firm,in real estate business, there is some stock of land, now the partners decided to dissolve the firm, and decided to distribute the stock of land among the partners.

Now,will the capital gains tax attract or not?, the book value of land as on date is Rs.50 lacs, now the fair market value of same is Rs. 1.5.crore,

pl clarify the same

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 January 2012 In case of dissolution capital gains arises
only in the case of transfer of capital assets. It is stock in trade for the firm and the profit arising if any on such sale/ transfer will be treated as business income in the hands of the firm. Section 50C will also not apply for stock in trade.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2012 Sir, can the firm be advised to continue and trf. the stock of land to the partners?

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 January 2012 It seems that the partners' minds have changed. We professional always pray that no firm should get dissolved.

Vipin Kumar

Vipin Kumar (Expert)
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10 January 2012 Try to distribute the assets on book values to avoid any Business Profits.
Once transferred in the hands of partners such shall become their capital asset.

They can individually sell their part and cost of acquisition shall be taken the amount on which they got it from firm.

CA Amit Talada

CA Amit Talada (Expert)
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16 April 2013 can we deffer the distribution over years to minimise the tax...

CA Amit Talada

CA Amit Talada (Expert)
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16 April 2013 can we deffer the distribution over years to minimise the tax...

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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17 April 2013 If the Partnership is at will and partners desires to continue some assets in the firm
only, it is indicative that the firm is still in continuation.
.

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