| COURT: | Bombay High Court |
| CORAM: | Akil Kureshi J, Sarang V. Kotwal J |
| SECTION(S): | 45(4) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | capital gains, Partnership |
| COUNSEL: | Vaibhav Pandya |
| DATE: | March 26, 2019 (Date of pronouncement) |
| DATE: | April 3, 2019 (Date of publication) |
| AY: | 2010-11 |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| S. 45(4): If new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership. As there is no transfer of a capital asset, no capital gains or profit can arise & s. 45(4) has no application (A. N. Naik 265 ITR 346 (Bom) distinguished, Dynamic Enterprises 359 ITR 83 (Karn) [FB] followed) | |
The property belongs to the partnership firm. It did not belong to the partners. The partners only had a share in the partnership asset. When the five partners came into the partnership and brought cash by way of capital contribution to the extent of their contribution, they were entitled to the proportionate share in the interest in the partnership firm. When the retiring partners took cash and retired, they were not relinquishing their interest in the immovable property. What they relinquished is their share in the partnership. Therefore, there is no transfer of a capital asset, as such, no capital gains or profit arises in the facts of this case. In that view of the matter, Section 45(4) has no application to the facts of this case
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