Taxation of revaluation of firm's immovable property

This query is : Resolved

sureshchand yadav (Querist)
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07 May 2012 e.g, Book value of firm's property is
Rs.1,00,000/-
Property is to be revalued at Rs. 1 crore.
If the difference of 99 lakhs is credited to Partner's Capital Account, the gain will be taxable in the hands of Partners or partnership firm?

And if the accounting treatment is incorrect, what is the correct accounting for the same?

Suresh Yadav
CA Final student

Sumti Bhadani

Sumti Bhadani (Expert)
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07 May 2012 1. Capital gain is attracted when there is a transfer of property. Since there is no transfer of property, therefore there will be no capital gain tax.
2. You can also revalue the assets by passing one of the following entry:
a) Assets A/c Dr.
To Revaluation Reserve

b) Assets A/c Dr
To Partner's Capital A/c