| Question And Answer | |
|---|---|
| Subject: | Sec. 45(4) and 9 B of the Income Tax Act. |
| Category: | Income-Tax |
| Querist: | prakash |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Firm, partnership firm, Retirement |
| Date: | September 12, 2023 |
Assessee is partnership firm having 3 partners. One of them has expressed his desired to retire from the firm due to diffrence of opinion about way of conducting the business. The retiring Partner is having debit balance of Rs. 6530000.00 to his account as on the date of retirement i.e. 31.08.2023. All of them agreed that the retiring partner will retire from the firm with immediate effect and he need not to pay any thing to the firm .
Issues :
- how his debit balance is to be written of in the Books of accounts
- what are tax implication of this retirement as per section 45(4) and 9B of the Income TAx Act
- Is there any tax liability on the retiring partner due to this retirement
According to the formula prescribed under section 45(4) of the Act, there will be a capital gain tax liability on the Partnership firm. The retiring partner will not have any tax liability.
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