Capital Gains-plz help

Anu, although i am not deadly sure, but i think as the property was divided between partners giving impact to their capital gain, it should be charged in the hands of partner itself.

on the same hand,u have to look that when the property was divided was any capital gain was impacted or not.

what do u mean from dividing asset into capital a/c of partners?

if building is standing in balancesheet of firm then firm has to pay tax on it.......

Thank u Mr.Madhur & piyush

this is  a  CA Final quest

i jst typed exactly as it came in the paper

so plz help me on this

If the partnership firm holds title to the property, then the resultant gain would be assessed in the hands of the firm only. However if the firm TRANSFERS the property to partners by way of an agreement and gets it registered, the partners individually become owners and the firm has no title to the said property. Consequently any gains arising out of transfer of that property shall be assessed in the hands of partners.

Hi Anu, i think if the firm has actually TRANSFERRED the property on March 31,1999, then capital gain arises to the FIRM on that day itself. There is 45(4) which talks abt transfer of assets by firm to its partners. Then the Fair Market Value as on 31/3/1999 will be taken as sale consideration. Consequently when the property is actually sold on 1/7/2006 the resultant capital gains arises to the partners itself.

Yes I agree with Sowmya..it will the correct treatment

My logic is that when assets distributed it must have taxable int he hands of partners as only share of profit from firm is not taxable in the hands of partners. So now they becomes individual owners of the property.

 So the property should be assessed in the hands of individual partners. Please correct me if i m wrong.

As per question it is clear that asset has been written off by debiting capital account and crediting asset account..now  sec45(4) will be applicable .

              since the asset has been transfered to partners on the same day therefore fair market value will be same thus there will be no capital gain in the name of firm........

 now it will be taxabe in the hands of partners

Thankz a lot everyone

I agree with Mr. Somya....