taxabilitry at retirement

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shweta bombe (Querist)
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03 January 2011 ABC IS A PARTNERSHIP FIRM.IT IS HAVING 3 PARTNERS. 2 ARE INDIVIDUALS AND 1 IS COMPANY. The 2 individual partners are retired. company wants to carry the business of firm. Whether capital gain arise. As the company is taking over the asset.
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CA. R. B. SAH

CA. R. B. SAH (Expert)
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03 January 2011 if the conditions of section 47(xiii)are satisfied then capital gain shall be exempt otherwise taxable.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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03 January 2011 In my opinion Section 47(xiii) is not applicable in this situation which requires continuance of all partners as shareholder in the company. In the above case two partners have retired from the firm. And the company has taken over the business of the firm. Virtually, the story of the partnership firm ends at this stage.

Capital Gains will be taxed in the hands of the firm only.

The market value of assets being transfrred to the partners will be taken as sales consideration and the book value in the firm will be taken as cost of acquisition. Section 45(4) may be referred for this purpose.

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