| Question And Answer | |
|---|---|
| Subject: | S.45(4) and S.9B |
| Category: | Income-Tax |
| Querist: | Sharad Shah |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | accounting treatment, death of partner, partnership firm |
| Date: | October 8, 2021 |
There are three partners in a firm. The firm is having two residential properties having high market value compared to cost. No depreciation has ever been claimed on the properties. The firm is carrying business of export and properties are shown as Investments in books of account.
One of the partner who was having 80% share in the firm expires. As per deed the share of the said partners goes to remaining partners only.
What will be impact under S.45(4) and S.9B of the act.
Whether firm will have to pay the tax since there will be reconstitution on account of death of a partner?
The accounting treatment in the books of a Partnership Firm on the death of a Partner is similar to that of a retirement of a Partner.
Although the partnership ceases to exist. A firm can continue to carry on the business with the existing partners.
The Department may be of the view that the term “specified person” defined under Section 9B and 45(4) of the Income-tax Act, 1961 (Act) can be extended to include the legal heirs of the partner.
Therefore, the provisions of Section 9B and/or 45(4) of the Act could be attracted in the hands of the Firm depending on the nature of pay-out by the Firm to the legal heirs of the deceased partner.