Question ID :
44631
45(4), 9B
Fact of the case:-
A partnership firm is to be reconstituted where one partner is retiring and one new partner is coming. The firm has some LAND acquired many years ago. At the time of reconstitution neither the land is revalued nor any part of the land is given to the retiring partner. The retiring partner is getiing only the closing capital balance and nothing else.
Query- Whether section 45(4) and 9B are applicable in the above situation where no distribution of the LAND. If it is applicable then how the tax on deemed capital
Posted by
dhanindra kumar surana
on
Apr 03, 2024
Filed Under
DIRECT TAXES
Section 45(4) of the Income Tax Act deals with the taxation of capital gains arising from the transfer of a capital asset by way of distribution at the time of dissolution or reconstitution of a firm. Similarly, Section 9B provides for taxation of capital gains in cases of transfer of a capital asset in the course of reconstitution of a firm.
However, in your scenario, since there is no distribution of any asset to the retiring partner and the retiring partner is receiving only the closing capital balance, the provisions of Section 45(4) and 9B may not be directly applicable. These sections typically apply when there is a transfer of capital assets, resulting in capital gains.
Posted by
CA SURABHI SACHDEVA on
Apr 03, 2024