It is treated as transfer. Capital gain is taxable in the hands of firm. The fair market value of the asset on the date of distribution is taken as full value of consideration. This rule is also applicable when an asset is transferred by an association of persons or body of individuals.
X and Y are two partners of a hardware trading firm. It is dissolved on March 10, 2019. At the time of dissolution, a plot of land owned by the firm is given to X (amount recorded in books of the firm is Rs. 45,00,000, however, fair market value is Rs. 66,00,000). This plot was purchased by the firm for Rs. 36,00,000 on March 5, 2012. Find out the amount of capital gain.
Capital gain will be taxable for the assessment year 2019-20 –
|Full value of consideration (i.e., fair market value on the date of distribution)
|Less: Indexed cost of acquisition (Rs. 36,00,000 × 280 ÷ 184)
|Long-term capital gain