Firm -tax

Dear MALLIKAARJUNA,

In the hands of Partner - Any asset or sum received on retirement is not taxable.

In the hands of Firm - Since what is transferred is a Stock in trade therefore Sec 45(4) will not be attracted.

Further Firm will not get the deduction of the cost of such stock in trade i:e it;s cost has to be added back if not separated from the value of "opening stock" or "purchases"

Since Drawings by a partner cannot be allowed as deduction to a Firm... 

For tax on capital gain,two conditions have to be fulfilled

1.There should be a transfer (other than items mention u/s 47)

2.The item should be a capital asset.

In your case,there is a transfer but Stock-in-trade is not a capital asset and thus there will be no tax effect on such transfer.

Dear Mallikaarjuna,

Partner - Any asset or sum received on retirement is not taxable.

Firm - Stock in trade is transferred  therefore Sec 45(4) will not be attracted.

agree with Mr.Amir

In the above situation what has to be followed by firm -in relation to tax treatment

The stock is given to partner is commercial land for full settlment of retairing partner

Dear Mallikarjuna,

Infact the following treatment should be followed in books as well & not only for Income Tax Purposes..  

The Land being an item of STOCK IN TRADE(SIT), must be either in "Opening Stock or Purchases",

For Income Tax purposes this stock must be reduced from opening stock/Purchases or credited to the Income Side..The offsetting account will be Partner's Capital account..

In short it's deduction is not available,

Amir is correct