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Whether Distribution Of Assets By A Firm Would Be Liable To Tax?

QUERY: M/s. GE is a registered partnership firm in the business of property development. It holds certain residential flats / office premises, which are not yet sold and which are held as stock-in-trade. Out of such properties, it intends to distribute certain premises among the partners at book value, by journal entries. It wants to know –

(i) What are the implications under the Income- tax Act, 1961 and under Stamp Duty / Registration Act?

(ii) Will it make any difference if the distribution takes place upon dissolution? How accounts are to be settled?

(iii) What will be the character of the property received in the hands of the partners?

As regards the balance stock remaining with the firm, it desires to know what are the implications under Income-tax Act, 1961 and Wealth Tax Act, 1957?
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SECTION(S): , , ,

(i) Section 45(4) of the Income-tax Act, 1961 would not be applicable, as M/s. GE is holding properties as stock-in-trade.

Now, as per the query M/s. GE want to distribute the stock-in-trade to its partners. In other words, the partners would withdraw the stock from business. In Sir Kikabhai Premchand v. CIT [24 ITR 506],

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