Please clear this matter
If the firm give stock in trade to retairing partner for settlment of his share
what is tax treatment ?
The firm is countinuing the business
malli and Nag (CA) (119 Points)
02 February 2010Please clear this matter
If the firm give stock in trade to retairing partner for settlment of his share
what is tax treatment ?
The firm is countinuing the business
Amir
(Learner)
(4016 Points)
Replied 02 February 2010
Dear MALLIKAARJUNA,
In the hands of Partner - Any asset or sum received on retirement is not taxable.
In the hands of Firm - Since what is transferred is a Stock in trade therefore Sec 45(4) will not be attracted.
Further Firm will not get the deduction of the cost of such stock in trade i:e it;s cost has to be added back if not separated from the value of "opening stock" or "purchases"
Since Drawings by a partner cannot be allowed as deduction to a Firm...
Mohammed Dalal
(Chartered Accountant)
(163 Points)
Replied 02 February 2010
For tax on capital gain,two conditions have to be fulfilled
1.There should be a transfer (other than items mention u/s 47)
2.The item should be a capital asset.
In your case,there is a transfer but Stock-in-trade is not a capital asset and thus there will be no tax effect on such transfer.
C.Balaji
(Learner)
(1867 Points)
Replied 02 February 2010
Dear Mallikaarjuna,
Partner - Any asset or sum received on retirement is not taxable.
Firm - Stock in trade is transferred therefore Sec 45(4) will not be attracted.
agree with Mr.Amir
malli and Nag
(CA)
(119 Points)
Replied 02 February 2010
In the above situation what has to be followed by firm -in relation to tax treatment
The stock is given to partner is commercial land for full settlment of retairing partner
Amir
(Learner)
(4016 Points)
Replied 02 February 2010
Dear Mallikarjuna,
Infact the following treatment should be followed in books as well & not only for Income Tax Purposes..
The Land being an item of STOCK IN TRADE(SIT), must be either in "Opening Stock or Purchases",
For Income Tax purposes this stock must be reduced from opening stock/Purchases or credited to the Income Side..The offsetting account will be Partner's Capital account..
In short it's deduction is not available,
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
CAclubindia
