section 47(xiii)

Aggregate(not individual) share holding of the patners should continue for a period of 5 years provided each partner should hold atleast one share....

means there shareholding should be 50% or more from the date of succession till 5 years

Hi,

I want to know if  the shares allotted to the partners of the firm in the company can be gifted to another partner of the firm in the Company will affect Capital Gain exemption.

i.e.

Mr. X and Mr. Y are partners of the firm and shares allotted to them at the time of conversion:

Shares allotted to Mr. X - 1000

Shares allotted to Mr. Y - 1800

1. If Mr. Y  transfer all its shares to Mr. X  by way of gift deed will it affect the capital gain exemption.(section 47(xiii))

2. If Mr. Y transfer  1000 shares to Mr. X and hold the remaining will it affect the Capital gain exemption.(Section 47(xiii) )

Please Clarify.

Originally posted by : deepa
	Hi, I want to know if  the shares allotted to the partners of the firm in the company can be gifted to another partner of the firm in the Company will affect Capital Gain exemption. i.e. Mr. X and Mr. Y are partners of the firm and shares allotted to them at the time of conversion: Shares allotted to Mr. X - 1000 Shares allotted to Mr. Y - 1800 1. If Mr. Y  transfer all its shares to Mr. X  by way of gift deed will it affect the capital gain exemption.(section 47(xiii)) 2. If Mr. Y transfer  1000 shares to Mr. X and hold the remaining will it affect the Capital gain exemption.(Section 47(xiii) ) Please Clarify.

1. If Mr. Y  transfer all its shares to Mr. X  by way of gift deed will it affect the capital gain exemption.(section 47(xiii))

Answer: Yes, since all partners ceased to be shareholder in the company section  conditions of 47(xiii) is revoked and capital gain shall be chargeable to tax in the hands on company on the date on which such exemption revoked at the rate applicable in the year in which such exemption is revoked . 

2. If Mr. Y transfer  1000 shares to Mr. X and hold the remaining will it affect the Capital gain exemption.(Section 47(xiii) 

yes, since  condition of section 47(xiii) is satisfied i.e.

each partner continue to be shareholder (even he holds one share) of the company

and

share holding of partners does not fall below 50%.