I want to know the scope of Sec. 45(4)in case of firm.
(1) what is the meaning of the term used in the above section- "distribution of capital assets on the dissolution or otherwise".
does it mean distribution to (i)partner only or (ii) anyone ( e.g. creditor for settlement of their debt.)
by the way, as per ICAI modules, it includes the case of business acquired by the company on dissolutin of firm, except the cases where condtions of sc.47(xiii) is satisfied.
(2) what does "on dissoltion or otherwise" mean? does it mean that - sec. 45(4) attract even in case of transfering asset by a firm , while it is in operation (i.e. not in the process of dissolution)
20 August 2011
1. It covers transfer to any one (e.g. Partners and creditors etc.) 2. Dissolution or otherwise mean- Bombay High Court held that: The Expression 'OTHERWISE" has to be read with the words transfer of capital assets and section 45 4 would get invocked even in the case of subsisting partners of a partnership firm, transferring assets in favour of a retiring partner in which case the Fair Market Value as on date of thasnfer should be taken as full value of consideration, The expression OTHERWISE" would cover any possible situation of tansfer of capital assets by the firm to partner[ CIT VS NAIK ASSOCIATES (2004) 265 ITR 346 (BOM)]
21 August 2011
Thanks Sir, but still i would ask that-
whether this sec. applies in the case " other than dissolution".
i.e. for simple understanding, i would be thankful for your comments on the following case:
a firm is operating throughout the year 2011. (i.e. it is not in the process of dissolution.) During this period it has transferred following capital assets:
(a) capital asset A (FMV 10 lacs) to creditor for settlement of its dues of Rs. 8Lacs
(b) capital Asset B (FMV2 lacs) to its working partner on mutual consent of patners.
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