Loss carry forward

Amir

Learner

4016 Points Joined December 2009

Answer to ur query deals with sec 72A(6) & Sec 47(xiii)

AS PER 72 A(6)

Where there has been reorganisation of business, whereby, a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company for the purpose of previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :

As per sec 47(iii):-

any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of ⁷¹[demutualisation or] corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company :]

Provided that—

(a) all the assets and liabilities of the firm ⁷²[or of the association of persons or body of individuals] relating to the business immediately before the succession become the assets and liabilities of the company;

(b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;

(c) the partners of the firm do 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; and

(d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;

⁷³[(e) the ⁷⁴[demutualisation or] corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for ⁷⁴[demutualisation or] corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]

RADHIKA JALAN

agarwal

1521 Points Joined December 2009

i agree with amir.....................

CA Devanshi Gandhi (Ajani)

FCA DISA Mcom CIFRS & LLB

9060 Points Joined February 2009

it can be carried forward by the new company

Nagaraj

CA Final

48 Points Joined August 2009

amir sir u told for business reorganisation i agree with u .... My question when Partnership firm taken by another company which is already in existence whether same provisions will apply...... here there is reorgainsation i.e the firm in not converting into company... it is taken over by another company ..

Amir

Learner

4016 Points Joined December 2009

Dear Nagraj,

Even in case a partnership firm is takenover by EXISTING COMPANY same provisions will apply...No Doubt about it..I am 100% sure..

Just read the opening words of Sec 72A(6),

Where there has been reorganisation of business, whereby, a firm is succeeded by a company......

"IT IS NOWHERE WRITTEN THAT COMPANY CANNOT BE AN EXISTING ONE"

Rajat Singhal CA,CS,CFA

Senior Manager (F&A)

254 Points Joined November 2009

Dear Nagraj,

It is not specifically mentioned about the take over of a firm by a Existing co. but provisions of section 72A will apply for this case and as a result loss can be carry forward by the co.

Regards

Rajat

kumarsatish022

Professional

165 Points Joined September 2008

Yes Aamir is correct if provisions of 72A(6) and sec47 are fulfilled , then it would be termed as Sucession of a partnership firm by a company . hence loss shall be carried forward

Archit

student

54 Points Joined June 2008

Answer to ur query deals with sec 72A(6) & Sec 47(xiii)

AS PER 72 A(6)

Where there has been reorganisation of business, whereby, a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company for the purpose of previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :

As per sec 47(iii):-

any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of ⁷¹[demutualisation or] corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company :]

Provided that—

(a) all the assets and liabilities of the firm ⁷²[or of the association of persons or body of individuals] relating to the business immediately before the succession become the assets and liabilities of the company;

(b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;

(c) the partners of the firm do 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; and

(d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;

⁷³[(e) the ⁷⁴[demutualisation or] corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for ⁷⁴[demutualisation or] corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]

THIS IS BARE ACT

uR FRND

ARCHIT

C.Balaji

Learner

1867 Points Joined October 2008

Mr.Nagaraj.

If the Provisions of Sec 72 A and 47 xiii are fulfilled then loss can be carried forward....

(4) Where there has been reorganisation of business, whereby, a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, then, notwithstanding anything contained in any other provisions of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company for the previous year in which business reorganisation was effected and other provisions of this act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :-

Provided that if any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) to section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor company, shall be deemed to be the income of the company chargeable to tax in the year in which such conditions are not complied with.

Sec 47

(xiii) Where a firm is succeeded by a company in the business carried on by it as a result of which the firm sells or otherwise transfers any capital asset or intangible asset to the company :

Provided that - (a) All the assets and liabilities of the firm relating to the business immediately before the succession become the assets and liabilities of the company;

(b) All the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession;

(c) The partners of the firm do 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; and

(d) The aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their share holding continues to be as such for a period of five years from the date of the succession;