Distinction between Section 9B and Section 45(4) of Income Tax Act 1961.
Since the insertion of Section 9B there has been lot of discussion regarding the distinction between the two sections.
Let’s throw some light on the applicability to make the blurred line visible –
- Section 9B is attracted when (Firm / AOP/ BOI) transfers capital asset or stock in trade to the (Partner of firm/ Member of AOP/ Member of BOI) on dissolution or reconstitution of such specified entity.
- Section 45(4) is attracted when (Firm/AOP/BOI) transfers capital asset or money to the (Partner of firm/ Member of AOP/ Member of BOI) on reconstitution of the entity.
Note- Reconstitution includes Admission, retirement, death of partner or change in profit sharing ratio among partners.
Two major differences can be noticed from the above Paras –
1:) Section 9B is attracted both in the case of reconstitution and dissolution of specified entity whereas Section 45(4) is attracted only in case of Reconstitution.
2:) Section 9B covers transfer of capital asset as well as stock in trade whereas Section 45(4) covers capital asset and money.
(Transfer of capital asset is common in both the sections).
Tax implications Differences –
- Section 9B covers transfer of capital asset and stock in the so taxability would arise in PGBP and Capital Gains as the case may be.( Full value of consideration and sale value shall be fmv on the date when asset is received by specified persons.
- Section 45(4) covers transfer of capital asset and money therefore taxability would arise only in Capital Gains.
So these were the major differences between the two sections.Hope you like it.
Author Bio
This is good attempt by a Student to write an article on a issue which is not so familiar, viz transfer of assets to a partner on reconstitution of a firm.
It would have helped to understand the implications of the provisions of Section 9B and 45(4) better if the basic provisions had been quoted. This would have facilitated to compare and understand the implications of the two provisions.