Conversion of a Proprietorship to PVt Ltd

A proprietorship firm was converted into a Pvt ltd company during 08-09. All assets and liabilities were taken over by the compnay and the Proprietor's Capital account was partly adjusted against the share capital and partly as Unsecured loans. The proprietor is also the Director of the company.

How will the IT returns for 08-09 of the two entites be filed. Separate return for Proprietorship till the date it existed and Pvt ltd co. from the date it took over to 31.0309. The TDS certificates are in the name of two entities as per the period of Business.

Is capital Gains tax applicable on such transfer?

Replies (1)

Capital Gain shall not be attracted if it satisifies the conditions of Sec 47

(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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