Q. > Please Help: Capital Gain Querry

274 views • Question added Dec 22, 2014 • Income Tax • By sumit marda , CA , Solapur

The firm M/s. ABC came in existence on 09/09/1996 and started business (Production) in F.Y. 1997-98. The firm purchased Land for factory building in F.Y. 1996-97 in the name of one of partner Mr. A but the payment for Cost Land was made by the above firm and accordingly debited the amount to Land A/c Rs. 303140/- in the Books of firm. No Depreciation was claimed on the Land value. Total area of Land is about 12 Acres. The factory bldg. is erected on 3 Acres of Land and reaming 9 acres Land is open Land.
Then One of the partner Mr.B retired from the firm w. e. f. 01/04/2014 having 25% share of profit ratio in the firm.
It was agreed among the partners that the ¼ area of Land (Open) is to be given to retiring partner Mr. B. as mentioned in Retirement cum partnership Deed. The 25% Book Value of Land Rs. 75785/- (25% of 303140) is to be debited to Retiring Partners account and crediting to Land Account. He has not taken share in any other Assets of firm. The remaining credit balance of Capital Account is paid to Retiring Partner by cheques.
Now the transfer deed is to be executed for the above Land transaction and the same is to be registered in sub-Registrar’s office. According to Sub-Registrar, the value of the Land for Stamp Purpose (Stamp Value) is Rs. 5500000/- for 1/4 area viz 3 Acres of Land.
Now, the querry is about the Capital Gain tax Liability either on Partnership firm or Retiring partner and working of Capital Gain, if any, and under which section, Or income u/s 56 of Retiring partner ?