There are six partners in the firm. 4 partners are desirous to retire in the firm and 4 new partners will be joining the firm in their case. Currently the firm is having only land valuing Rs. 5 lakhs as assets. On the date of retirement of old partners, the said land will be revalued at Rs. 2 Crore (Fair Market Value) on that date. The said firm will continue with same partners.
Questions:
1) Whether there will be any Income tax liablity because of revaluation?
2) If Yes, whether on revaluation? or subsequent sale of asset by firm. What will be the nature of gain, Capital gain or business income?
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