Like Mr Jain advised , it’s a gift treatment now. The only other solution could be, the partner owed liabilities to wife and paid off through car. Gift is appropriate here and write off the asset. I looked hard to find partnership company laws to find treatment for gifts received in vain  But there were treatments for gifts received. So write off a gift and let your auditor deal with it. 

As  per my knowledge as you said it  gifted to  the  wife  means it is no more a part of the business property hence it should not be in the balance sheet anymore hence writting off assets is necessary by reverse any accumulated depreciation and reverse the original asset cost

I’m not sure but I believe it follows no disposals method because it is not for sale. So, it is written off at cost less accumulated depreciation. Your correct. 

Capital 500

Profit 500

liabilities 1000

assets 2000

if Asset is worth 200, then assets will be 1800 and profit will reduce by 200 ie profit = 300. So equity & liabilities = 1800. 

Balance sheet tallied!!

It is the same for gift as well. Mr. Jain did not debit capital account otherwise equity and assets will be understated by 200, total 1600. 

Agreed with you 

It cannot be shown as drawings  as it is a asset given without consideration and you can't directly deduct it from capital even if you did then what about depreciation ?

I think we should transfer wdv of asset to capital account , so that there is no require for charging depreciation for that particular asset.

If you can do that then do it. But fixed asset value cannot be transferred to capital account And your using the drawings account entries. This is partnership accounting right 

https://www.lazybone.in/content/Sample%20Chapters/SYJC/BK%20Chapter%202.pdf

Forgot that there is no retained earnings here and the profit is transferred to partners capital account. That means capital increases and bank balance increases. Then when an asset is purchased the asset balance remains the same. Now, derecognise the asset and reduce the capital and charging the depreciation will tally the balance sheet. Your correct. 

Ok 

But partnership or company rules for depreciation and individual depreciation are different as per income tax act 

Even he wants to capitalise it's from capital account

Again he didn't sold  means no profit or loss 

Again no deed is made let's say relinquishment or gift deed

That depreciation is a pain to many. It’s not clearly defined how a SLM from company act will be taxed as per wdv of income tax act. Leaving the tax part, because relatives are not taxed on gifts, Pass on the entries. 

Depreciation is done until the last day. 

I’ll check professional taxation tomorrow and find out what it like. 

@ Ayusmita tax is simple, no mention of depreciation or tax savings on depreciation. However I realised depreciation is sunk cost and company+ tax act both have SLM/WDV methods. Nothing big about depreciation because the trading income/ taxable income doesn’t even mention anything about sunk costs like depreciation. 

If you know the treatment for partnership or sole proprietor tax acts, it’s cool.