Since the introduction of capital gain taxes in India in 1947, the question of taxation of a partner on his capital balance appreciation has been subjected to judicial debate in various dimensions. Common law did not consider a partner as a person distinct from a firm, and hence, Courts have repeatedly held that a partner cannot make taxable profits from the firm. While certain amendments were made in 1987 to tax certain aspects of capital infusion and withdrawal by a partner, a very large part of transactions amongst a partner and firm were outside tax net.
The Finance Act, 2021 retrospectively introduced a tax on appreciation to the partner’s capital, even if such appreciation is notional. Though the ambiguity and lacuna felt in the Act have been to a great extent clarified by the Rules framed thereunder, lot of questions are still unanswered. The paradigm shift will garner significant contravenes when the law is put into practice.
This webinar seeks to trace the path taken over the last 75 years on taxation of a partner, including
- Legislative history on taxation of dissolution of a company and a firm
- Jurisprudence laid down by various Courts on the meaning of ‘capital asset’, ‘transfer’ ‘consideration’ etc.
- The retrospective law now framed by the Parliament
- The Rules made under the powers delegated by the Parliament.
The subject deserves a thread bear analysis, simply to appreciate the power of the Parliament to legislate and the extent to which they can exercise such power. The perspective with which the exchequer looks a commercial transaction and the hardship it would cause to genuine businesses is a thought to ponder upon.
Lakshmikumaran and Sridharan Attorneys is pleased to organise this webinar where a panel of experts led by Mr. S. Vasudevan, Executive Partner, will discuss and analyse the nuances of the new provisions.
- S. Vasudevan, Executive Partner, L&S
- S. Sriram, Joint Partner, L&S