Rule 50 — Attribution of income taxable under section 67(10) to capital assets remaining with the specified entity, under section 72. Made under s.72, s.67 of the Income-tax Act, 2025.
Rule 50 gives effect to Section 72 and Section 67 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) states the office of the rule: for the purposes of section 72(5), the amount chargeable to income-tax as income of a specified entity under section 67(10) is to be attributed to capital assets remaining with the specified entity in the manner this rule provides.
Sub-rule (2) gives the formula for the only case in which attribution happens. Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, that is charged under section 67(10), relates to revaluation of any capital asset or valuation of a self-generated asset or self-generated goodwill of the specified entity, then A = B x (C/D), where A is the amount attributable to the capital asset remaining with the specified entity for the purposes of section 72(5), B is the amount charged under section 67(10), C is the increase in, or recognition of, the value of the asset remaining with the specified entity because of the revaluation or valuation, and D is the aggregate of the increase in, or recognition of, the value of all assets because of the revaluation or valuation.
Sub-rules (3) and (4) close off the other cases. Where the amount charged under section 67(10) does not relate to such revaluation or valuation, it shall not be attributed to any capital asset for the purposes of section 72(5). Irrespective of sub-rule (2) or sub-rule (3), where that amount relates only to the capital asset received by the specified person from the specified entity, again it shall not be attributed to any capital asset.
Sub-rules (5) to (7) are the filing obligations. The specified entity must furnish the details of the amount attributed to the capital asset remaining with it in Form No. 27; the person authorised to verify the entity's return of income under section 265 must verify that form; and it must be furnished on or before the due date referred to in section 263(1)(c) for the tax year in which the amount is chargeable to tax under section 67(10).
Sub-rule (8) supplies three definitions. The amount charged under section 67(10) relates to revaluation or valuation only if the revaluation is based on a valuation report obtained from a registered valuer as defined in rule 56(f). The specified entity is not entitled to depreciation on the increase in value of an asset on account of its revaluation, or on the recognition of the value of a self-generated asset or self-generated goodwill due to its valuation. And "self-generated asset" and "self-generated goodwill" carry the meanings assigned in section 67(11)(b).
When a partner or member is paid out with money or assets exceeding his capital account balance, section 67(10) charges the excess in the hands of the entity. Section 72(5) then has to prevent that same gain being taxed again when the entity later sells the assets that were written up to fund the payout. Doing that requires a rule that says which assets carry the charge and in what proportion. This rule supplies it: it spreads the charged amount across the revalued or newly recognised assets in the ratio of their write-up, and it says plainly that where no revaluation or valuation is involved, or where the charge relates only to the asset the outgoing person took away, there is nothing to attribute.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Amount attributable to a capital asset remaining with the specified entity | A = B x (C/D) | Where the amount charged under section 67(10) relates to revaluation of a capital asset or valuation of a self-generated asset or self-generated goodwill; B is the amount charged, C the increase in or recognition of value of that asset, D the aggregate for all assets | Sub-rule (2) |
| Due date for Form No. 27 | On or before the due date referred to in section 263(1)(c) | For the tax year in which the amount is chargeable to tax under section 67(10) | Sub-rule (7) |
Attribution is the exception, not the default. Only an amount that traces to a revaluation or to the valuation of a self-generated asset or self-generated goodwill is spread across the remaining assets; sub-rules (3) and (4) leave everything else unattributed, which means the section 67(10) charge stands on its own and the cost of the entity's remaining assets is untouched. Whether the amount so traces is not a matter of accounting narrative — sub-rule (8)(a) makes it depend on the revaluation being based on a valuation report from a registered valuer as defined in rule 56(f). The denominator D takes in the increase in value of all assets from the revaluation or valuation, including assets that did not stay with the entity, so A is a share of the charge and not the whole of it. One consequence runs the other way: sub-rule (8)(b) denies the entity depreciation on the written-up portion and on a newly recognised self-generated asset or goodwill, so the write-up cannot serve twice. Form No. 27 is not optional paperwork attached to the attribution; it is the rule's own reporting requirement, due by the section 263(1)(c) date for the year of charge and verifiable only by the section 265 person.
A firm pays a retiring partner money and an asset worth Rs 3 crore more than his capital account balance, and Rs 3 crore is charged to the firm under section 67(10). The excess arises from a revaluation, supported by a registered valuer's report, that wrote up land by Rs 4 crore and a building by Rs 1 crore, a total of Rs 5 crore, and the land stays with the firm. Under sub-rule (2) the amount attributable to the land is 3 crore x (4 crore / 5 crore) = Rs 2.4 crore. The firm reports this in Form No. 27 by the section 263(1)(c) due date, and under sub-rule (8)(b) it claims no depreciation on the Rs 4 crore write-up.
A firm or other specified entity meets it in the year of a partner's or member's exit, when Form No. 27 is filed alongside the return, and later when the remaining asset is sold and its cost is computed under section 72(5).
the amount charged to tax under section 67(10) shall not be attributed to any capital asset for the purposes of section 72(5)
the specified entity shall not be entitled for the depreciation on
The specified entity shall furnish the details of amount attributed to capital asset remaining with the specified entity in Form No. 27.