Question ID : 44703

430378

A partnership firm is to be reconstituted where one new partner is coming. The firm has some LAND acquired many years ago. At the time of reconstitution land is being revalued and balance (Revalued profit) is to be adjusted to existing partners capital. After admission land is gain revalued to old rate and difference to be adjusted with new and old partners capital account. Resulting increase in Old partners capital account and decrease in new partner capital account. Query- Whether section 45(4) and 9B are applicable in the above situation where no distribution of the LAND. If it is applicable then how the tax on deemed capital or any other taxability

Sections 45(4) and 9B are not applicable in the scenario where land is revalued, and adjustments are made to partners' capital accounts without any actual transfer or distribution of the land. Therefore, there would be no immediate tax liability under these sections. However, it is advisable to carefully document the reconstitution process to ensure clarity and compliance with tax laws.