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Tax Treatment at time of Dissolution

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(Querist)
30 April 2010 What will the tax effect in the hands of retired partner if he gets more than the amount he contributed to the firm at the time of dissolution.
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Aditya Maheshwari

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Aditya Maheshwari (Expert)
30 April 2010 Tax treatment as per section 45(4)

(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]

So firm will have to tax on dissolution and then distribution in the hands of partner will be tax free
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Aditya Maheshwari

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Aditya Maheshwari (Expert)
30 April 2010 Tax treatment as per section 45(4)

(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]

So firm will have to tax on dissolution and then distribution in the hands of partner will be tax free
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Aditya Maheshwari

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Aditya Maheshwari (Expert)
30 April 2010 Tax treatment as per section 45(4)

(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]

So firm will have to tax on dissolution and then distribution in the hands of partner will be tax free
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CA PAWAN SETHI

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CA PAWAN SETHI (Querist)
30 April 2010 thanx
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Aditya Maheshwari

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Aditya Maheshwari (Expert)
30 April 2010 You are welcome.
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taxindiaconnect

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taxindiaconnect (Expert)
30 April 2010 Agree with Aditya
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