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Capital gain tax query

shailesh khandelwal (Service) (39 Points)

14 March 2012

Dear All
I have folowing queries related to capital gain tax please advice for the same.

1) There was land & building in the name of the Partnership firm.
Now the partners wants to sale the asset and dissolve the partnership firm and distribute the amount between themselves. Please advise for the taxability of the same in the hands of Firm & its partners.

2) Also advise for the taxabity in case of company for similar case. That is sale of land & building by co. and liquidation of co and distributing the amount to its shareholders

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2 Replies

Anumanchipalli Sathikonda (Tax Consultant) (1349 Points)
Replied 14 March 2012

Mr.Shailesh Khandelwal

The provisions of section 112 will apply in your case for the firm and for the company also.

Best Wishes

Sathikonda

p.s. You have said that the assets will be sold and the profits will be distributed by the partners.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 14 March 2012

the provision of Section 46 relating to distribution of assets by the co to it's shareholders in case of liquidation & the related CG tax is as under:

Capital gains on distribution of assets by companies in liquidation.

⁹⁶ 46. (1) Notwithstanding anything contained in section 45, where the assets of a company are distributed to its shareholders on its liquidation ⁹⁷ , such distribution shall not be regarded as a transfer by the company for the purposes of section 45.

(2) Where a shareholder on the liquidation of a company receives any money or other assets ⁹⁷ from the company, he shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 48.