No capital gain tax on sum received by partners towards their share in assets on retirement from firm

No capital gain tax on sum received by partners towards their share in assets on retirement from firm

[2019] 104 taxmann.com 444 (Bombay)

IWhere retiring partners were paid sums on reconstitution of assessee-partnership firm in proportion of their share in partnership business/asset, no transfer of assets being taken place, no capital gains would arise

Section 45, read with section 2(47), of the Income-tax Act, 1961 – Capital gains – Chargeable as (Sub-section (4)) – Assessment year 2010-11 – In assessee-partnership firm, original partners retired and new partners continued business of firm – Firm’s assets were evaluated – Retiring partners were paid sums as per their share of partnership asset – Whether there was no transfer of capital asset by way of distribution upon reconstitution of firm and making payment to retiring partner; sum paid by assessee-firm to retiring partners would not constitute capital gain under section 45(4) – Held, yes

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