Query on capital gain
This query is : Resolved
18 January 2012
A is an owner of one Retail Outlet including land of the Retail Outlet since 1978.
He entered into partnership with B to run the Retail Outlet.
A introduces his Land & Agency and B introduces Cash Capital to run the Retail Outlet w.e.f. 01.04.2012
The cost of Land was Rs. 25000/- in A.Y. 1979-80 & construction of the Retail Outlet is nil due to Depreciation charged.
The Query is: -
1. Whether Capital gain will be attracted on transfer to Partnership Firm.
2. What will be the taxation on the event if “A” decides to be out in year 2014.
He entered into partnership with B to run the Retail Outlet.
A introduces his Land & Agency and B introduces Cash Capital to run the Retail Outlet w.e.f. 01.04.2012
The cost of Land was Rs. 25000/- in A.Y. 1979-80 & construction of the Retail Outlet is nil due to Depreciation charged.
The Query is: -
1. Whether Capital gain will be attracted on transfer to Partnership Firm.
2. What will be the taxation on the event if “A” decides to be out in year 2014.
CA PARAS BAFNA
(Expert)
18 January 2012
CAPITAL GAIN WILL ARISE TO A IF HE INTRODUCES LAND AND CONSTRUCTION IN THE FIRM. THE AMOUNT CREDITED WILL BE ITS SALES CONSIDERATION.
.
THE CONSTRUCTION WORK OR SHOP MUST BE HAVING CERTAIN VALUE EVEN AFTER PROVIDINFG DEPRECIATION. IT WILL ATTRACT SHORT TERM CAPITAL GAIN. ON LAND LTCG WILL ARISE.
.
WHEN A WILL OUT FROM THE FIRM, FIRM WILL ALSO BE OUT. THE SHOP+LAND WILL BE TREATED AS FIRM'S ASSET AND CAPITAL GAIN WILL BE ASSESSED IN THE HANDS OF THE PARTNER TO WHICH THE ASSET WILL BE TRANSFERRED.
.
FOR THE FIRM COST OF ACQUISITION WILL BE AS STATED IN THE BOOKS OF A/C.
SALES CONSIDERATION WILL BE MARKET VALUE.
.
THE CONSTRUCTION WORK OR SHOP MUST BE HAVING CERTAIN VALUE EVEN AFTER PROVIDINFG DEPRECIATION. IT WILL ATTRACT SHORT TERM CAPITAL GAIN. ON LAND LTCG WILL ARISE.
.
WHEN A WILL OUT FROM THE FIRM, FIRM WILL ALSO BE OUT. THE SHOP+LAND WILL BE TREATED AS FIRM'S ASSET AND CAPITAL GAIN WILL BE ASSESSED IN THE HANDS OF THE PARTNER TO WHICH THE ASSET WILL BE TRANSFERRED.
.
FOR THE FIRM COST OF ACQUISITION WILL BE AS STATED IN THE BOOKS OF A/C.
SALES CONSIDERATION WILL BE MARKET VALUE.
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