Question And Answer
Subject: Whether distribution of capital asset at the time of dissolution of firm is covered ?
Querist: ca vinay v. kawdia
Answered by:
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Date: May 19, 2021
Query asked by ca vinay v. kawdia

In view of newly amended section 9B and Section 45(4) by F.A. 2021, whether there is any difference in terms – Dissolution vis-à-vis reconstitution? Section 9B refers to cases of reconstitution or dissolution whereas; s. 45(4) only refers to reconstitution. Whether the amended section 45(4) is applicable to case of dissolution of firm?

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Although the words of the newly introduced section 45(4) of the Income-tax Act, 1961 (Act) does not refer to a situation of dissolution; The Memorandum to the Finance Bill 2021 has clarified that the newly proposed sub-section (4) of section 45 of the Act applies in a case where a specified person who receives during the previous year any capital asset at the time of dissolution or reconstitution of the specified entity.

Therefore, section 45(4) of the Act is applicable to case of dissolution of firm.

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