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Tax on payment to retiring partner

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(Querist)
08 October 2011 Dear Expert,

Pls advise on the below:-
A partner retires from a Firm. As per Books his Capital A/C on that date stands at Rs. 2 Lakhs.

1) Can his account be settled for Rs. 1 Lakh ? Tax implication in the hands of partner and the firm ?

2) Tax implication in the hands of partner and firm if account settled for Rs. 3 Lakhs ?

Kindly advise. Many thanks in advance.

Regards
G Sharma
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CA.E.Deepan Chakravarthy

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CA.E.Deepan Chakravarthy (Expert)
08 October 2011 According to me, no capital gain arises. let see what other expert says.

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