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%.
Menu
Long term capital gain or business income
The gain on sale of building , being a depreciable asset , will be charged as STCG.
Ma'am but the firm was reconstituted with new partners and the depreciation was not charged since then. And the income assessable is Income from House Property. So, will it still be STCG ?
Yes Sir, the reconstitution of firm, not claiming depreciation or charging of income under House Property , have no effect because building is still a depreciable asset and it's sale will be STCG. However, here if you can justifiably bifurcate the sale proceeds of the land value and the building values separately then you can save tax on sale of land which will be charged under LTCG @ 20%. Even here, the building will be charged under STCG @ 30%.
Thank You Ma'am for your quick response :)
Recent Topics :
- Audit Executive (Remote, India) - Ace Auditing Off
- GST Transaction On Used Clothing
- ITC availed on 5%-rate passenger transport (AC bus
- Extension of Due Date of AY 2026-27
- FAST DS 2026
- Does AIS GST Purchase aggregate GSTR-2B expenses?
- Form 26A - System has encountered some technical p
- Tool to convert GST invoice PDFs into Excel —
- Revised or rectification or leave it?
- Private limited tax audit
Related Topics :
CAclubindia
