Conversion

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Tanmay (Querist)
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24 March 2017 suppose a proprietorship firm want to convert into private company.Then what are the provisions to be applied so that no tax liability is charged in the following case

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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24 March 2017 Given below is text of law (along with explanation in brackets where ever required) in order to claim exemption in case of transfer of sole proprietorship business to company. -

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 ("in the business carried on by it" means company has to do same business which was carried on by Sole proprietorship before its transfer):

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 remain as such for a period of five years from the date of the succession; (from date of transfer till 5 years sole proprietor must hold more than 50% of shares in company)

(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; (In consideration of transfer received by sole proprietor should includes only shares of private limited company and nothing else other than that)

Tanmay

Tanmay (Querist)
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24 March 2017 In this case there are 4 individual proprietorship concerns which will convert to private limited company

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