Capital gain in distribution of assets

Our partnership firm consists of two partners and the land and building of the firm is registered in firms name. We want to divide the land and building between two of us equally. For this we are planning to do two separate registeries for each half in each partners name(currently there is only one registry in name of firm). Can someone tell me, Will we have capital gain in this case and if yes,in whose hands will it be taxable, firm or partner?
Asked 3 months ago in Capital Gains Tax from Delhi, Delhi
Dear Sir,

As per section 45(4)

The profits or gains arising from the transfer of a capital asset by way of distribution of 
capital assets on the dissolution of a firm or other association of persons or body of 
individuals (not being a company or a co-operative society) or otherwise, shall be 
chargeable to tax as the income of the firm, association or body, of the previous year in 
which the said transfer takes place and, for the purposes of section 48, the fair market value 
of the asset on the date of such transfer shall be deemed to be the full value of the 
consideration received or accruing as a result of the transfer.


However there are number of judgements which says that no capital gain arises in case of distribution of assets at the time of dissolution of firm because there is no transfer involved. What a partner get is his share in the firm.

I think this position can be taken considering the various judgement.

Please feel free to call/ revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
766 Answers
5.0 on 5.0
  Talk to Abhishek Dugar
S.45(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purpose of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.” 

Thus the taxability will be on firm of paying capital gains tax
Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
  Talk to Shyam Sunder Modani
Dear Sir,

Based on the information provided by you, I would like to have some clarity on your part. Was this land and building shown as an Asset and No Depreciation claimed or was Depreciation claimed on the same.

Please get back with the same to help us, assist you better.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP. 
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
  Talk to Rohit R Sharma

Ask a Question

Get tax advice from top-rated chartered accountants. It's quick, easy, and anonymous!
Ask a question

Other Questions

Chartered Accountants

Abhishek Dugar
CA, Mumbai
766 Answers
5.0 on 5.0
Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
Vishakha Agarwal
CA, Bangalore
210 Answers
5.0 on 5.0
Shiv Kumar Agarwal
CA, Delhi
195 Answers
5.0 on 5.0
Lalit Bansal
CA, New Delhi
73 Answers
5.0 on 5.0
Vishrut Rajesh Shah
CA, Ahmedabad
231 Answers
4.9 on 5.0
Ria Nagpal
CA, Ahmedabad
28 Answers
5.0 on 5.0
B Vijaya Kumar
CA, Hyderabad
290 Answers
5.0 on 5.0
Bhagyashree Kankaria
CA, Pune
26 Answers
5.0 on 5.0