Proprietorship asset transfer of capital of partnership

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Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2015 Mr A already runs two manufacturing units producing two distinctive products. durig the current year he wants to convert one of the above said units as a partnership by admitting B as a partner. only amount standing as net assets in the that unit was taken as capital of Mr.A. Mr B brings further capital in cash. what are tax implications

Amol S Joglekar

Amol S Joglekar (Expert)
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11 August 2015 When the running business is transferred to Partnership......
Section 45 (3) of the Income Tax act
The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

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