Conversion of Proprietary into partnership

Hi friends could anyone tell me what are the tax consequences on conversion of a proprietary business into partnership business? How to calculate the CG when business is sold to a newly formed partnership firm

Replies (5)

Chintan, practically what happens is that a new partner join the alredy established proprietor. therefore there is no transfer of property.

Also sec 45 of income tax provide for Propreitor/firm succedded to company and in that case the relevant section will apply.

But if a proprietor transfer his property to a new partnership firm it will be regarded as a transfer and CG will be applicable as to a normal sale.

Correct me if i am wrong.

Piyush Jain

Ya i know that when a new partnership firm is formed its a transfer and liable to CG tax. But how exactly to calculate the tax on sale of the business thats what is required by me mate. i have searched all the sites but not fine a single way of calculating the tax liability on sale of business

 

Chintan, here the sales consideration will be the amount at which the asset is transffered and the cost of acquisition will be the cost at which it was acquired by the proprietor. indexztion benefit will be their and will be subject to tax in which the transfer is made. Like any other transfer.

 

Hope this will make life easier.

 

Piyush

There's still doubt . Wait for more replies or you should ask expert of CA Club

Dear All,

 

 

To my knowledge there is a provision in CG chapter, which spells out that assets & Liabilitites need to be transferred at BV to the firm. in such a situation , if assets are transferred at BV, where is the question of CG?

please help me with your valuable feedbacks.

 

Regards,
Murthy

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