Retirement of partners

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 December 2015 Partnership firm has immovable assets(land) which the firm wants to transfer in the name of partners
Will the firm be liable for capital gains and what is the remedy

Querist : Anonymous

Querist : Anonymous (Querist)

01 December 2015 Kindly advice

Querist : Anonymous

Querist : Anonymous (Querist)

01 December 2015 Please advice

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CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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06 December 2015 It is not clear that -
1. Nature of business of the company i.e. if the firm is into real estate, the land is a stock in trade to it and chargeable under PGBP else under capital gains;

2. Whether firm is dissolving or the partners are retiring (based on header of the query)?

On dissolution of the firm, the profits or gains arising from the transfer of a capital by way of distribution of capital asset on the dissolution of the firm.....or otherwise are taxable u/s 45(4) of the IT Act, 1961.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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06 December 2015 Legal litigants are making a lot of controversy about the interpretation of the provisions of section 45(4) of the Act. U/s 45(4) of the Act, capital gains tax is sought to be charged on a firm in case of transfer of a capital asset & distribution of capital assets, on the dissolution of the firm or 'otherwise'. The retirement of a partner from the firm is sought to be covered under the scope of the term “otherwise”, under the provisions of section 45(4) of the Act. This studied further and opined a few litigants that transfer on retirement of a partner is not covered u/s 45(4). However, taking any step based on such opinion will be at risk.

Hence, advised to consider such transfer as capital gain / (loss) under the Act.