Capital gain in distribution of assets

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

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

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.