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rajni ASHANI (Querist)

30 October 2010 Change in constitution from proprietary to pvt ltd company with an agreement stating take over of all the assets and liabilities how it affects under income tax law, mvat law

please guide me

RANGA SRINIVAS

RANGA SRINIVAS (Expert)

30 October 2010 Dear Rajani

Please read Sec 47 of the Income tax Act, 1961. It is very clear that such conversion is not a transfer and hence not subject to Cap gains tax subject to satisfaction of certain conditions.
(xiv) Where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company :

Provided that - (a) All the assets and liabilities of the sole proprietary concern relating to the business immediately before the succession become the assets and liabilities of the company;

(b) The shareholding of the sole proprietor in the company is not less than fifty per cent of the total voting power in the company and his shareholding continues to so remain as such for a period of five years from the date of the succession; and

(c) The sole proprietor does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;

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