Tranfer of WIP of partnership firm to partners

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Hiloni Shah (Querist)
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17 November 2020 Kindly help me to know the tax implication on transfer of WIP from Firm to Partner. One of my client(FMCG Firm) is constructing office building but the land on which building is constructed is on the name of partner. Now firm has decided to transfer all WIP related to office building on the name of Partner. All bills of WIP are on the name of firm.Its the second year of construction My query is whether it will be chargeable to capital gain, WCT, Service Tax, VAT. I have transferred the WIP Balance to partners balance in their profit sharing ration ,I am in opinion that there will be no tax implication as WIP is not a fixed asset so no question of Capital Gain but whether it will come under coverage of any other tax. Kindly let me know if you know regarding it. Thank you in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 November 2020 It's a capital work in progress clasifiable under capital asset.
Section 45. (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.

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