When an asset is transferred by way of distribution on the dissolution of firm, AOP or body of individuals, the profit or gain arising from such transfer, shall be chargeable to tax as the income of firm, AOP or body of individuals, of the previous year in which such transfer takes place.
For computing capital gains the Fair Market Value on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer. This provision has come into effect from 1-4-88 i.e. assessment year 1988-89.
The amount recorded in the books of firm, BOl or AOP shall be the cost of the asset and the fair market value on the date of transfer to the person shall be treated as sale price.