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conversion of HUF to Pvt. Ltd. Co.

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(Querist)
18 January 2011 What are the steps to be taken by an HUF firm, wants to change its constitution into private limited company.
Which is the best possible way and what are the tax implications.
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CA PARAS BAFNA

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CA PARAS BAFNA (Expert)
18 January 2011 1. In Section 47(xiv) the provisions for conversion of Sole Proprietor ship Concern into Company has been mentioned.
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2. I am not sure , but of the firm opinion, that the word "Sole" restricts application of this sub-section to individual proprietor ships only.
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3. In other words I want to say that HUF is not equivalent to "sole" as a "sole" can not form an HUF.
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4.However in case of Individual Proprietor only following points may be kept in mind -
1. Transfer of all assets & Liabilities to the Company.
2. Not less than 50% unchanged Voting power -of Proprietor upto 5years
3. no other consideration or benefit from Co. to proprietor other than allotment of shares.
then there will be no transfer and such no capital gains will arise.
5. But in case of HUF Proprietor, I invite discussion from our experts.





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