Tax ability in case where selling share of partnership firm

book value is neutralized . i.e. capital invested in partnership firm by partner.

premium if any, is to be added with taxable income of partner.

If the retiring partner gets amount in excess of his capital and share in profit   then nothing is chargeable to tax in the hands of partner.

CIT v R. Lingamallu Raghukumar(2001) 247 ITR

hello

we saled of our partnership (pattadare) of cinema hall .

we were partners since 1950 and we saled of in 2011 i just wanna ask about the taxes on the amount which we got

in selling our partnrship.

we all partners were giving rent of the land on which cinema is built since 1950 now cinema is closed .

In this case the super structure of building has been constructed and the land owner is a third party.

The valuation of  Super Structure i.e. Cinema Hall or/and  property constructed around, as on 1.4.1981 is required. This is when  the building has been shown as Capital Asset.  No depreciation has been calculated upon the building.    In case of Depreciable assets , capital gains will be calculated in accordance to Section 50.

Please reply the following questions-

 1. we saled of our partnership (pattadare) of cinema hall .

A. Who is the owner of the cinema Hall. Whether any Individual or Partneship Firm ? 

B. What do you mena by sale of Partnership of Cinema Hall ? 

Whether, Super Structure has been sold or business as a whole has been sold.

C. The Cinema Hall is a depreciable asset. Whether Depreciation has been shown on Building ?

D. Also give more details of Furniture, Projector etc.

A.  owner is one of the partner in cinema hall . like he own the land and share in buisness also.

owner of cinema hall are 3 including us , we owned evrything as a partner but not land but we pay rent of land.

we were 3 partners 1) we 25%   2) A 25%   3) B 50% this B also owned the land . so we give rent to B of land.

B. we saled our 25% of partnership in buisness of cinema hall , building , all the things included furniture and machines.  we are like partner in cinema since 1950 so we owned pattedaare in it. without our concern no one can distruct and buld something else on it .

C. cinema hall is closed because it was going in loss ..1 year back  i dont about depreciation shown or not but the balance sheet is in loss as shown to gov. we just saled it off 

D. yaaaa furniture and machines projectors are there in cinema . like we saled evrything which we owned as our partnership. like we were having 25% partnership 

please let me know how much we are taxable on the amount we got.

like what slab and of what rate ??

It appears that partnership has been dissolved and all the assets of the firm is being sold out including building. Hence the consideration on sale of fixed assets being received by the firm would be shared by the partners in the ratio as stated in partnership deed and accordingly tax would be calculated.

helo

But we saled of our partnership as it is none of the things are sold yet i mean the cinema assets.

suppose we saled off our share in 50 lakhs and for your considerattion cinema assets are of 8 lakhs in total so our

share would be 2 lakhs.

now can you please give a ruff idea about the total tax i have to pay like just a idea that it would be some around how much ?

like 10 % 15 % or 20% 

Ankit,

We can opine only on the basis of facts presented before us.

Whether the firm is dissolved  or being continued by the remaining partners?

Is it so that,  you have been given a sum to get retired from the firm ?

Most Probably  you can sell it either to A or B-  the existing partners,

Because other than the Partner "B" or his associates,  no body else will be interested in the super-structure.

It is important to know,  whether and how the amount has been recorded by -the buyer of share- in his books.    . The Cinema Hall is a depreciable asset. Whether Depreciation has been shown on Building ?

If there is no Building in the Balance Sheet, then it must be shown in the respective partners' Balance sheet.

It is also possible that the building may not be shown any where?

All these are such important issues, by providing the details of which, you would be able to plan better and can reduce your

tax liability. With all such details you may contact a CA or Consultant.

hey paras,

let me clear you one since we were partners since 1950 as a tenant of cinema hall and we were also giving rent of land so we selled it to third party because third party is interested to purchase whole cinema from all partners one by one so they he can setup some different buisness on cinema's land .

without purchasing our share or anybody share he wont be able to do that so we selled it for such a high price and i think we deserve this as we were like partner since last 60 years.

balance sheet in respect to buisness is shown in loss so that we get permession from gov to close it as we r in loss.

i think now i am very much clear to you. That's why that third party purchased our share from us then he'll go to partner A and B as well.

so now can you suggest me that how much we are taxable ?

and if we are taxable then how we save our taxes ??

and what rate of taxes applied on this type of capital gain ?

as we selled 60 years old partnership so some one said to me that you are 10 % taxable some one said 20 % 

some one said you can save your whole tax .

so i am bit confused that to whom should i ask ? and who will be the right person that one help me out better...

In this case all the partners will face the similar problem. The firm should not be dissolved. 

You have not replied

It is important to know,  whether and how the amount has been recorded by -the buyer of share- in his books.

The Cinema Hall is a depreciable asset. Whether Depreciation has been shown on Building ?

If there is no Building in the Balance Sheet, then it must be shown in the respective partners' Balance sheet.

Where it has been shown ? Clear first this issue.

paras , 

yes i apologies for above...

yaaa there is a balance sheet in which building value is Rs 2.2lac , machine + all other assets value is Rs 25000, our cash Rs 50,000 , and our indivisual cash 5000 Rs...

above figures are for cinema firm like we have 25% share so you can calculate my asset amount by that.