Hi Friends,
Need help . There are two partners A & B . B retiers form the business and A continues the business as a proprietorship firm.B on retirement gets 5 lakhs more than his share of capital & profits.What will be the tax treatment of this excess payment in the hands of the firm,B & A
Dear Shailly,
Excess sum received on retirement is not taxable in the hands of partner
Payment to retiring partners does not involve ‘transfer’ - Where on the retirement of a partner from a firm, he was paid his share in the partnership which was worked out by taking the proportionate value of his share in the net partnership assets after deduction of liabilities and prior charges, and including therein the proportionate share in the value of goodwill, it was held that no part of the amount received was assessable as capital gains - Addl. CIT v. Mohanbhai Pamabhai /CIT v. Bhupinder Singh Atwal /CIT v. P.H. Patel /CIT v. N. Palaniappa Gounder/CIT v. Madan Lal Bhargava /CIT v. P.N. Sreenivasa Rao /Addl. CIT v. Smt. Mahinderpal Bhasin
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