Capital gain

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This query is : Resolved

KETAN MEHTA (Querist)

20 December 2012 A partner ship firm sells the property owned by firm, and partner withdraw the money from firm to the extent of his share from the firm. if Partner opted to choose to discharge the tax liabilities to the extent of his share on his own which he has drawn from the firm, 1. Does partner is safe even if firm do not discharge tax liabilities on balance amount? 2. Can partner discharge tax liabilities in his return /pan no. or have discharge in firm's pan no. Pl reply.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

20 December 2012 In case of tax liability of the firm, the partners are liable jointly as well as severally.
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It is the firm which is first made liable to pay the taxes.
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In case firm fails in discharging its liability , then partners are jointly made liable.
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You have to pay your share in tax by an account payee cheque only and to avoid any confusion or double payment by the firm, it is better to communicate with the other partners about your action.
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You remain safe up to some extent untill all the partners discharge their obligation properly.
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Tax payment should be made by using PAN of Firm only.
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C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

29 December 2012 The capital gain whether short term or long terms earned by the firm has to be paid by the firm and after payment of the taxe the share is to be distributed in the books of account.

As regards withdrawal of share by the partner, there is no tax implecation even the partner can withdraw any amount if no restriction is provided on withdrawals in the partnership deed and can use the money so withdrawn which is to be debited to that partner's capital account. The partners can also have a debit balance in the firm. The income as share of profit of the partner is tax free and is exempted u/s 10 hence the tax of the firm has to be paid by the firm and not by the partners but in case the firm does not pay the tax then all the implecation shall be on the firm and the firm shall be liable for payment of interest under various sections.

No doubt the liablity of the firm is of all the partners but first the firm has to pay the taxes and thereafter it is switched over to the partners.

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