capital gain

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mukesh n.shah (Querist)
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20 April 2010 A partner transfer a plot of land to the firm by book entry. subsequently, next year, the firm trasfer the same plot to the partner by reversing the same book entry. will such transfer taxed in the hands of the firm ?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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20 April 2010 such transfer will be liable for capital gains tax u/s 48(4) read as under at the market value:
(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]

However the asset should be a capital asset. If asset is in stock in trade then no applicability of the same.

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