Q. Income Tax - Partnership Firm

Question

A Partnership Firm is having two partners A & B with equal profit sharing ratio. Apart from other assets, said firm owns land and building  which are shown seperately in statement of plant, machinery and equipment under the head land and building respectively. There is change in constitution of firm with A & B retiring and C & D being entering.  On the date of reconstitution capital balance of A & B was Rs 70 Lac each. However they were paid Rs 1 Crore each on retirement. This excess amount was paid to retiring partner on account of  revalued value of land and building. My query is what shall be the treatment of excess amount of Rs 30 Lac each paid to retiring partner in their respective hand.

Answer 1

It is taxable in hands of the firm u/s 45(4) read with section 9B.