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Amey S. Haware (ICICI Bank Ltd.)     26 May 2013

Conversion of partnership firm to private limited company

Hi all,


I have one client who converted their partnership firm into Private limited company on 27.03.2012 by taking over the business of partnership firm. The firm had three partners but on formation of a company there are only 2 partners as directors of the company because one of them retired from the business. My concerns are as follows :


1. Should any intimation be sent to the Income tax department as there is income tax refund due to be received in respect of AY 2012-13. What will be the status of that refund? Will refund be received in the name of the company even if not intimated?


2. Should all closing assets and liabilities of partnership firm be shown as opening assets and liabilities of private limited company?


3. Will there be any income tax issues since one of the partners have retired from the firm at the time of conversion into company?


4. Can unabsorbed depreciation and losses of firm be carried forward by company?


5. Is there some filing to be done with registrar of partnership for retirement and takeover of firm by company?

 3 Replies

P B Srivathsan

P B Srivathsan (Audit Manager)     27 May 2013

My suggestion would be to re-constitute the firm and then convert the new firm to company. Give both intimations to the ITO and Registrar. Because of change in ownership, carry forward provisions would be affected. Please refer to the Income Tax act for more details.

1 Like
Amey S. Haware

Amey S. Haware (ICICI Bank Ltd.)     27 May 2013

The firm has already been converted into company w.e.f. 27.03.2012...


I think if we change PAN no. from firm to company there is no need to intimate separately to ITO.


Please also guide on capital gains issue


Arun (Others)     29 January 2014

Hello All,

I have a couple of question on the topic of conversion of partnership firm to private limited company

1. We have a partnership firm with 7 partners. The current office space is owned by the partnership firm. If we convert our partnership firm to Private Ltd. under Part IX, as I understand from the above, it will automatically get transferred to the Private limited firm. I just want to ensure that no further taxes (like stamp duty or any other) would have to be borne by the new entity. Please clarify.

2. The partnership firm has developed a software product which is doing well in the market. Will this be automatically transferred to the new company? Will the new company be taxed on this for any reason (like goodwill etc.)?

3. Will all the employees of the firm automatically become the employees of the new entity and will their seniority etc. be held intact? I ask this from the point of view of gratuity / superannuation etc.

Thanks a lot in advance for the replies. I would be greatly obliged if someone can clarify this soon.



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