capital gain working

If a partnership is converted into proprietorship, it is as good as saying that a firm has been dissolved and the assets are distributed. The Firm will be liable to CG tax in respect of assets distributed as such under the provisions of section 46(4) and the fair value as on the date of distribution shall be sale consideration. IF the assets are sold normally to third parties, the normal provisions of sec 45 will apply.

If cash is distributed to partners, the partners will be liable since there is extinguishment of rights, whixh is regarded as transfer u/s 2(47) - as decided in re binodilal kanadia