Transfer of captial asset by firm to partner no dissolution

which capital asst is gifted.?

 

Land & Building

Can we apply 47(iii) transfer excludes gift or will or irrevocable trust

No you cannot apply sec.47(iii) to this case, as it is not applicable on partnership firm.
Section 45(4) applies in your case, fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.

Two points

1. Capital Asset (Land& Building) is transferred from Firm to Partners. Section 45(4) applies on dissolution. in this case there is no dissolution.

2. 47(iii)  does not specify to whom it is applicable

56(2)(vii) shall apply on partner fmv of property shall be taxable as income.
in case of firm, I think 47(iii) shall apply.

Thanks for the query,
1. Capital asset is transfered from Firm to Partners, Section 45(4) is applicable, on clear reading you would find that this section is applicable on all kinds of transfers and not only dissolution since it says C.G on t/f of Cap. Asset by way of distribution on dissolution or OTHERWISE.
This otherwise has full inclusive meaning that would include any reason whatsoever, even if there is no dissolution.
Thus, FMV is sale consideration for the purpose of section 48.

2. Sec. 47 will cause Sec. 45 ineffective ie capital gains will not be there, but Since it is a gift Sec. 56(2)(vii) gets attracted which will cause the Stamp value of that property to become taxable as Income from other sources in the hands of partner.

So, in total It would be taxable be it under IOS or CG or in the hands of firm or partner,
though it seems to me that in above situation gift will be taxed under IOS head in the hands of partner.
Please revert with further views and issues,

Thanks,
Abhimanyu