Conversion of Partnership Firm to a Company

No capital gains are accrued or arisen at the time of conversion of partnership into a private limited company under Part IX of the Companies Act, irrespective of subsequent change in the shareholding of such company [Umicore Finance Luxembourg (AAR No. 797 of 2009)].

In a landmark Judgement of the Bombay High Court, in, CIT v M/S Texspin Engg. & Mfg. Works (ITA no 222of 2001 dated 5-3-2003)(unreported) after considering the provisions of Companies Act, provisions of income tax relating to capital gains and relying on the ratio of Malbar Fisheries Company v CIT (1979) 120 ITR 49 (SC), CIT Vs. George Henderson & Co Ltd (1967) 66 ITR 622 (SC), CIT Vs. Gillanders Arbuthnot & Co (1973) 87 ITR 407 (SC), held that, when a firm register as company, as per the procedure prescribed under part IX of the companies Act no capital gain tax arise to the firm.

no need to form private limited co, existing co can also acquire.

Plase any one can clarify or give source where it is necessary for Conversion of Partnership Firm into PVt Co it has to be carry out as per  provisions of Part IX, of the company act 1956.