Partner entitled to take away more money than credit in his capital account....

My friend is a partner in a business firm... He entered into the business with a capital contribution of 10 lakhs.... After six years, his capital account shows a balance if 6 lakhs... He wanted to come out of the firm and demanded 50 lakhs.... The other partners agreed finally to pay 40 lakhs.... Whether he has to pay tax on this 34 lakhs.... If, so under which head..... How the firm will claim the excess amount paid to my friend.....
Replies (1)

"The other partners agreed finally to pay 40 lakhs."        What is the goodwill of the firm at present?

"Whether he has to pay tax on this 34 lakhs.... If, so under which head....."    Yes, under PGBP

"How the firm will claim the excess amount paid to my friend....."       To be accounted under Goodwill

Refer: https://accountingexplained.wordpress.com/2015/07/11/treatment-of-goodwill-in-partnership/

 

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