Tax on retiring partner and existing partner from llp

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swamy karlapudi (Querist)

12 February 2019 Hi sir,

Kindly solve this tax issue sir, there are 3 persons from a family formed LLP some years back, with equal share capital, later on purchased a capital asset (land) for Rs.20 lakhs. That land present market value is Rs.5 crores. Out of three partners one partner wants to retire from LLP firm at his actual share capital contribution. Because they are from one family, remaining partners wants to settle his share at actual contribution only. The problem is what are the tax complications applicable for the above situation, and as it is LLP registered under ROC, is there any valuation rules applicable for valuation of retiring partners share, like in Pvt. Ltd? And in whose hands capital gains tax will be levied? Need expert suggestion please....
Thanks in advance..

Nilesh Gami

Nilesh Gami (Expert)

14 February 2019 Section 50CA is introduced in case of transfer of unlisted shares in a company (not firm or LLP). Capital gain on transfer of assets to partners and vice versa does not arise at the time of retirement of one of partners as section 45(4) is not applicable at the time of retirement of partners and business is continued. In my opinion, capital gain shall not arise in the given case.

swamy karlapudi

swamy karlapudi (Querist)

11 March 2019 Thank you Nilesh Gami sir.

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