The central board of Direct Taxes (CBDT) has issued guidelines under newly introduced section 9B and substituted sub-section (4) of section 45 of the Income-tax Act, 1961. According to which, from now, capital assets, money or stock in trade received by a partner while its dissolution or reconstruction would be considered as a deemed transfer and profits or gains arising from such transfer would be subject to income tax.
The new sub-section (4) now provides that where a specified person receives any money or capital asset or both from a specified entity, during the previous year, in connection with the reconstitution of such specified entity, then any profits or gains arising from receipt of such receipt by the specified person shall be chargeable to income-tax as income of the specified entity under the head “Capital gains”.
It has been further deemed that this income shall be the income of the specified entity of the previous year in which such money or capital asset or both were received by the 1 specified person.
It has been further clarified that when a capital asset is received by a specified person from a specified entity in connection with the reconstitution of such specified entity, the provisions of sub-section (4) of section 45 of the Act shall operate in addition to the provisions of section 9B of the Act and the taxation under the said provisions thereof shall be worked out independently.
Both, the new section 9B and substituted sub-section (4) of section 45 are applicable for the assessment year 2021-22 and subsequent assessment years.