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TRFR OF OFFICE PREMISES, IN PARTNER'S NAME

Snarayanaswamy (PRACTISING COMPANY SECRETARY ) (38 Points)

10 May 2007

KINDLY LET ME KNOW, WHETHER AN OFFICE PREMISES, A FLAT ( IN A POSH RESIDENTIAL AREA) WHICH WAS USED BY THE PARTNERS FOR THEIR OFFICIAL PURPOSE, AND ALSO CLAIMED DEPRECIATION BENEFITS ON THE PREMISES, CAN BE TRANSFERRED IN THE NAME OF A PARTNER, FOR HIS PERSONAL USE. IF THE FLAT IS SOLD TO SUCH A PARTNER, FOR A PRICE MORE THAN THE BOOK VALUE, AND THE RESULTANT PROFIT IS WHETHER TO BE TREATED AS A CAPITAL GAIN OR AS A BUSINESS PROFIT OF THE PARTNER SHIP FIRM. THE PREMISES IN THE QUESTION IS USED MORE THAN 36 MONTHS.

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1 Replies

Bala (CA Practice ) (63 Points)
Replied 10 May 2007

If the block of assets ceases to exist and the if the sale price exceeds the Original cost of asset then the situation will be:
1. The profit in excess of original cost will be [b]short term capital g[/b]ains, as the asset is depreciated and the difference between the original cost and the WDV will be treated as balancing charge u/s 41.
If the block of assets ceases to exist and the if the sale price exceeds the WDV but not the original cost of asset then the situation will be:
1. The profit in excess of sale price over the WDV will be treated as [b]balancing charge u/s 41.[/b]