28 December 2008
ABC Enterprises is a partnership firm which was undertaking manufacture of plastics and is a small scale indutry.The business was discontinued Five to six years back and is not having any other income and the Firm has not filed any incometax returns since it has discontinued its business activity.
During the Financial Year 2004-05 the Firm has sold its plant & machinery to a third party and no gain/profit has arisen consequent upon sale of its machinery and the firm has not paid any tax and it has also not filed any tax return. The Firm has received a part of the consideration in the same Financial year 2004-2005 and the same was used for the payment of its creditors. The firm has not received the balance sale consideration from the sale of plant & machinery and there is no chance of recovery.
The Firm has sold its Land and Buildings during the Financial 2007-2008 to a company in which two of the partners of the Firm are also directors in that company say XYZ Private limited. The Firm or its partners have not paid any tax on the gain or on the business income which has arisen on transfer of Buildings and has also not paid any capital gains tax on the transfer of Land and it has also not filed any tax return for the Assessment Year of 2008-09. The company which has purchased has not deducted/paid any tax on behalf of the Firm. The company instead of paying the sale consideration to the Firm has paid the total sale consideration during the Financial Year 2008-09 to the partners of the Firm individually at the mutually agreed ratio and all the partners have got double the investment/capital they have made 12 years back ie for Rs.100/- capital they got total amount of Rs.200/-; The Firm was not formally dissolved and is not functiong for the past 5 to 6 years. Pl inform the consequences/liabilities/penalties in detail that will arise out of this transaction to the Firm as well as to its partners. Some of the partners are willing to pay their part of tax on the excess amount they have received, then such excess amount will be treated as long term capital gain or income from business or income from other sources, will these partners will also be required to pay taxes on behalf of other partners who are not willing to pay any tax or the partners are liable for only to the excess amount they have received?
28 December 2008
The issue is to be examined in detail it is known that every firm and company has to file the return whether income is there or not. The issue is not resolved request you to examine in detail and respond.
CAclubindia
