Capital gain query
This query is : Resolved
26 March 2016
Kindly advice:
1). Mr. A purchased a plot in F.Y. 1981-82, in his own name & credited the same in his business books of account where he was the sole proprietor, business name XYZ & Co.
2). Mr. B was added as a partner to the business in F.Y. 1984-85. The proprietorship concern XYZ & Co. became a partnership firm.
3). Mr. A did not take out his plot. It remained as an asset of the firm till today.
4). Now, the firm is to be dissolved.
Query is :
a). Is there anyway that the plot can be transferred back to Mr. A?
b). Any other way, so as to avoid capital gain tax in hands of firm?
Thanks,
Mehak
1). Mr. A purchased a plot in F.Y. 1981-82, in his own name & credited the same in his business books of account where he was the sole proprietor, business name XYZ & Co.
2). Mr. B was added as a partner to the business in F.Y. 1984-85. The proprietorship concern XYZ & Co. became a partnership firm.
3). Mr. A did not take out his plot. It remained as an asset of the firm till today.
4). Now, the firm is to be dissolved.
Query is :
a). Is there anyway that the plot can be transferred back to Mr. A?
b). Any other way, so as to avoid capital gain tax in hands of firm?
Thanks,
Mehak
27 March 2016
In My opinion, There are 2 parts in which your question needs to be dealt.
1. The ownership of the plot in government records.
2. The ownership of the plot in Partnership firm.
In Government records (registrar), has Mr. A changed the ownership of the plot and transferred it to partnership firm ? If not, it still belongs to Mr. A. If yes, then he needs to "buy" it from partnership firm. In case of dissolution, when the distribution of assets is being worked, he may ask for his plot (subject to approval by Mr. B).
If there is no transfer of ownership in government records, and only an accounting entry is passed, then the plot can be treated as contribution from A to partnership firm and can be taken back by him.
No Capital gains applicable if no change of ownership in Government registrar records.
1. The ownership of the plot in government records.
2. The ownership of the plot in Partnership firm.
In Government records (registrar), has Mr. A changed the ownership of the plot and transferred it to partnership firm ? If not, it still belongs to Mr. A. If yes, then he needs to "buy" it from partnership firm. In case of dissolution, when the distribution of assets is being worked, he may ask for his plot (subject to approval by Mr. B).
If there is no transfer of ownership in government records, and only an accounting entry is passed, then the plot can be treated as contribution from A to partnership firm and can be taken back by him.
No Capital gains applicable if no change of ownership in Government registrar records.
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