Partners retaining premises constructed by firm

Tax planning 458 views 4 replies

Guest

Hi all,

There is a partnership firm which is a developer & builder.

some of the partners want to takeover some of the flats constructed.

what will be the tax implications for the partner? will the difference between stamp duty value of the flat and cost of flat transferred to partner's capital a/c be taxable?

(The firm transfers the flat free of cost to the partner, from the work in progress)

thanks

Replies (4)

Ankit

CA CS

3064 Points Posted on 06 September 2013

Since the same forms a part of the Stock in trade of the firm , the same would not come under the head capital gains and consequently, section 50C will not apply. However, since they would become a part of the related parties, the difference will be taxable under section 40A(2). Also, if the value exceeds Rs. 5 cr., and the other conditions oc 92C apply, even transfer pricing provisions will become applicable.

shivam gupta

Student

142 Points Posted on 06 September 2013

Deat Ankit sir,

If you have gone through the Finance Act 2013 then you will find the from now on if a Land or Building is transferred below the stamp Duty Value then the transaction will be accounted as such transfer has been made on stamp duty value & tax will be deducted under the head PGBP.

For Reference check the FInance Act 2013 ( & please read Memorandum explaining finance Bill 2013)

Waiting for Comments.

Guest

I am not sure whether section 43CA (transfer of land/buliding held as stock in trade for less than stamp duty valuation) applies to partners taking over the flats.

please clarify!

also, 40A(2) covers only payments made to related parties.. but taking over flats would not be a payment?!?