X, a partnership firm was engaged in manufacturing business until 2009-10 under the partnership of A & B. The X was owning Land & Building as depreciable Asset on which depreciation was charged in the books. B retired on 31st March 2010 and two new partners C & D were admitted. The manufacturing business of the firm was transferred to a Limited company ,where both A & B were Directors. The firm was reconstituted between A,C & D and it had no business on 1st day of April 2010. The building was renovated and one more floor was constructed on it. Now, the partners decided to give on Rent since the firm has no business. The rental income was assessed under the head Income from House Property.
Question whether Profit on Sale of building be taxed as LTCG because it is Capital Asset in the hands of newly constituted firm OR STCG being a depreciable Asset (but the firm did not charge any depreciation since its reconstitution)
Since it is a partnership firm the STCG or Business Income will be 30% while LTCG 20%.
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