One of our client's real estate company wishes to takeover the business of a partnership firm as per the provisions of Sec. 47(xiii) of the Income Tax Act,1961. We shall comply with the conditions of Sec. 47(xiii) namely:
(i) that the transfer should be of business as a going concern with all assets and liabilities,
(ii) that the consideration for the transfer should be solely by issue of shares to the extent of partners' capital in the firm and
(iii) that the identity of interest of the same partners in the paid-up capital of the firm should continue to the minimum extent of 50 per cent for the next five years.
The partnership firm has some nominal fixed assets and a land worth few crores as stock in trade. The existing partners of the firm shall be issued share capital to the extent of 50 percent of the paid up capital of the company. Can our company issue shares to the partners at a premium? And is the above scheme compliying with all provisions of Income tax Act and Companies Act?
CAclubindia
