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Amount received from new partner in firm as share of goodwil

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This query is : Resolved

SANJEEV GUPTA (Querist)
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22 January 2013 A partnership firm consisting of two equal partners admits the third partner with 1/3 share. it receives Rs. 1000000/- from new partner on account of goodwill. This amount is credited to premium account and then to old partners capital accounts. This amount is over and above the amount received from third partner as his share of capital. What is the tax treatment of this Rs. 10 lacs in the hands of firm/partners.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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22 January 2013 IT SEEMS TO BE A CASE OF RELINQUISHMENT OF RIGHT BY PARTNERS AND PARTNERS MAY BE MADE LIABLE FOR CAPITAL GAINS TAX.
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HOWEVER, TAX CAN BE SAVED, IF THE ASSETS OF THE FIRM ARE REVALUED-PROPERLY THROUGH THE VALUERS PRIOR TO THE INTRODUCTION OF THE NEW PARTNER IN A SUITABLE MANNER.
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