A partnership firm consisted of two partners X and Y and doing trading activity. Due to differences of opinion, partner Y is getting out of the partnership and the business is being continued by Partner X, taking Z as a partner. Since the trade receivables on the date of retirement of partner Y is around Rs. 400.00 lacs and the realization period is long and since there are chances of bad debts, the amount due to the retiring partner was settled at 50 % of his capital. The remaining 50% capital of Y was transferred to the capital account of partner X. What are the tax implications of the transaction?
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