LLP Dissolution : Tax in the hands of partners

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  1. Sir
    In Case of a LLP , In india what is the Tax Liability in case of Dissolved of LLP
    Two Partners have Contributed in ratio of 70 : 30 RS. 500,000/- Share Capital.
    This Pvt Ltd Company is converted into LLP - No TAx .
    Shares become Shares in Partnership .

    When this Same above LLP is Dissolved in future and RS. 1000000/- has to be Distributed between two partners.
    What is the going to be the tax liability of profit of RS.500000/- received in the hands of above two partners
  2. ZED

    ZED Well-Known Member

    There are few cases in which it was held that such profit would be a capital receipt not liable to be taxed in the hands of partner.
    In the hands of firm, there shall be no taxability.

    In one case I was reading it would be treated as Income from other sources in the hand of partner. Though personally I am in favour of first view, after giving due respect to S.45(4).

    45(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.
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