Change of Share in partnership firm

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Piyush (Querist)
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21 July 2022 In a partnership firm, one partner is reducing its share by 8% from 33% to 25% & other partners are acquiring the same.
Total Capital of Firm as on date of transfer - 170000/-
Capital of partner with 33% as on date - 114000/-

Will there be an internal entry to be passed for the said exchange of shares (If yes, then at what value ?
Is there will be any tax to the partner or Firm ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 Yes, pass entry on their respective capital accounts.
Capital gains tax applicable only at the time of leaving the company.
Partner buying the share should pay for it to the seller.

Piyush

Piyush (Querist)
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22 July 2022 At what value of consideration ?
Total Capital of Firm as on date of transfer - 170000/-
Capital of partner with 33% as on date - 114000/-

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 Is there any payment between the partners for the change in partnership holding.
How total share capital is 170000 and 33% share is 114000.

Piyush

Piyush (Querist)
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22 July 2022 Transfer of funds will not happen.
Its only for the BOA.

Valuation of firm as on date is 170000/- , but as other partners have overdrawn as per books, the capital of 1 partner who is reducing the share has capital balance of 114000/- as on that date.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 Retain his share 42500 25% of 170000 and pay him the balance.

Piyush

Piyush (Querist)
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22 July 2022 Sir,

No one is paying a single rupee. this will be adjusted through a JV.
So 8% share amount will be received by 1 partner & given by rest of the partners in acquiring ratio through JV.

So question is 8% will be of 170000/- i.e., 13600/- or reverse calculation based on 114000/- for 33% means 345454/- of which 8% comes to 27636/-.
Which one should be used ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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22 July 2022 Reverse calculation based on 114000/- for 33% means 345454/- of which 8% comes to 27636/-.

In view of overdrawn by other partners.

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