| Question And Answer | |
|---|---|
| Subject: | Reconstitution of firm , outgoing partner receives cash in excess of capital in the books of the firm ? |
| Category: | Income-Tax |
| Querist: | Ravi aiftp |
| Answered by: | Mr .Ganesh Purohit, Senior Advocate |
| Tags: | outgoing partner receives cash in excess of capital in the books of the firm, Reconstitution of firm |
| Date: | January 16, 2024 |
In case of reconstitution of partnership firm, outgoing partner receives payment in cash in excess of the amount of capital in his name in the books of accounts of the firm, the same would be taxable under section 45(4) of Income Tax Act, 1961 as capital gains. This capital gains would be long-term or short-term where the firm has no capital assets? As Rule 8AA provides only with relation to capital asset. Whereas the excess amount received because of huge stock in trade in books of accounts.?
The excess amount paid to the specified person shall be chargeable to income tax under section 45(4). It will be subjected to capital gains under section 45 in the hands of specified entity and shall be chargeable to income tax.
Source : AIFTP Journal November 23