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Dissolution of partnership firm

06 June 2016

Hi all,

I want to know about tax treatment on dissolution of Partnership Firm.Firm wants to transfer its closing stock to its partner. So what will be the tax impact? Whether it will be taxable in hands at Partner or Company?.. If taxable in hands of company than how to calculated capital gain..

Kindly help me..

Thank YoU!

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4 Replies

Deepak Mulewa (Proprietor) (29 Points)
Replied 06 June 2016

Business Stock should be considered as sales and profit should be taxable as income from Business and profession rather than capital gain. Again stock could be transfered at cost value avoiding any tax liability in the firm.

Thanks,

SHANU SHANKLESHA (ca) (58 Points)
Replied 07 June 2016

Hii,

If i transfered at a cost value, it wont be taxable in hands of partner?/.. Can you please imform me the governing section?.. I will transfer closing stock at cost only so neither firm has to pay tax and partner?

Deepak Mulewa (Proprietor) (29 Points)
Replied 07 June 2016

This stock are business stock in trade and not capital asset for the firm than why capital gain clause would be applicable to the firm. It just need to be sales of goods above cost value and withdrawal for partner. This sale value should also include applicable sales tax.

If capital asset is converted into stock in trade than this conversion will attract capital gain which is not in your case. For you it is reverse so I dont think capital gain provision would be applicable at all.