Capital gain on dissolution of firm

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

11 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

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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11 January 2016 Relative firm means partners in x firm are relatives of the partners in firm "xy"
.
It is possible to transfer the assets and stock at a reasonable value , taking into consideration
the fair market value of the fixed as well as current assets.
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The tax liability on the firm under dissolution: has to pay capital gain tax on the fixed assets. The income from transfer of stocks will be considered under the head of Business Income.
.

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2016 Sir,if One family having two firm and one firm who is going to dissolve transffering assets and stock
then how will be calculated capital gain

give me answer with suitable example.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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12 January 2016 There must be some consideration for each and every item of asset and liability in Rupee terms. The market value of the land & building has to be taken as consideration. Capital gains will be calculated in the prescribed manner. Similarly stock and other current assets are also be transferred at a price . Profit/loss is calculated. The transaction has to be completed as if the first form is being dissolved irrespective of the fact that the transferee is a sister concern.

Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2016 sir if no sale consideration is received by the firm on account of transfer the assets
because they are relative .
still capital gain will be here???

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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12 January 2016 The firm can not be said to be a relative of another firm.
.
At what value you will record these assets in the new firm's Books? or will not record at all ?
.

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Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2016 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
partners in both firm are same
capital gain is applicable,if yes then please give me section/circular/case laws etc. for supporting this