Change of partners in partnership firm

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Gourang Agarwal

Business Owner

26 Points Posted on 15 July 2016

Hi,

A partnership firm has 4 partners A- 45%, B- 30%, C- 15%, D- 10% share respectively. The firm is formed for doing real estate business and it has a land as stock-in-trade.

Now A and C are retiring (60%) and new partner E is introduced with 30% share. Rest left 30% will be taken by B and D equally.

As more than 50% share is changing so any liablity under Income tax will arise any does stamp duty will be applicable for B,D and E?

Income for A and C will be treated as Capital gains in their personal file?

Please suggest your views.

Thanks

Replies (2)

Guest

Posted on 15 July 2016

For firm, any brought forward business loss in proportion to share of retiring partner will not be allowed for carrying forward and set off..

For retiring partners, they are normally get their capital account balance (which is made up of capital, profits, interests), and share of goodwill. Since partnership share is a capital asset. In my views, share of goodwill might be considered as sale consideration of the share, and cost of that share could be the capital invested.

And I think stamp duty would be paid on registration of new partnership deed.

Else consult a CA or wait for other replies.

Thanks