Dear friends

In my training, I have faced following question :

When one partnership firm transfers an asset to another partnership firm composed of the same partners then what provision is/are attracted? Capital Gains/Gift/Clubbing

Do reply.

Its a sale, Capital gain provisions shall apply.

The Whole situation is like this :

Two partnership firms ( A and B ) are already in existence and running diferent kind of business though made up of same partners.

There is one asset in A firm which is not in use and at the same time is required by B firm. So A transfers it to B at NIL consideration. A removes the asset from its block of assets and B added the same in its block of assets.

There is no specific provision in IT Act regarding transfer or gift by one partnership firm to another. Section 47(3) talks about transfer by an individual to a firm but nowhere it talks about transfer by a firm to firm.

Partnership firm being a separate entity under Income Tax Act, we cant treat this as a partner transfering capital asset. Section 56 is also not applicable here. And if there is no consideration, section 2(47) is not attracted. Similarly, it cant be a capital gains.

So, under this situation, no tax provision is attracted.

Is my interpretation correct? Waiting for replies and discussions.