chintz (CA Final ) (129 Points)
06 March 2010
When a partnership firm is converted into company ,assets are valued at market value or cost to firm ?
What is Cost of acquisition to the company if it sells the asset?
Cost of p'firm or market value at the date of conversion.
Pl give ref of relevant section and case law.
thanks
CA Pranjal Joshi
(CA)
(331 Points)
Replied 08 March 2010
Hi,
if the question is from angle of capital gain computation, pl. first study the Section 47 (xiii) transactions not regarded as transfers which is reproduced below -
Section 47 [(xiii) 70[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);]
Vivek Angrish
(Manager Finance & Accounts)
(232 Points)
Replied 08 March 2010
So, in case all the above conditions are fulffiled, there will be no capital gain in transfer of assets.
adithyan
(student)
(63 Points)
Replied 08 March 2010
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 08 March 2010
The first four conditions should be fulfilled in totality. If any of the conditions not fulfilled then computation of tax as per Section 45(4)
Bala
(Student)
(498 Points)
Replied 08 March 2010
In such case Captial gains would be Net Consideration less Networth of the firm takenover..
chintz
(CA Final )
(129 Points)
Replied 10 March 2010
thanks for the reply..
What is Cost of acquisition to the company if it sells the asset?
Cost of p'firm or market value at the date of conversion.
Rahul Bansal
(Finalist)
(35929 Points)
Replied 29 April 2010
| Originally posted by : chintz | ||
 |
thanks for the reply.. What is Cost of acquisition to the company if it sells the asset? Cost of p'firm or market value at the date of conversion. |
 |
COA--------> Cost for which the previous owner acquired it.
DT Fundas - Tarun rustagi
( Author)
(1150 Points)
Replied 29 April 2010
agree with pranjal sir and all other members
Madhav Rastogi
(Advocate)
(23 Points)
Replied 07 July 2010
| Originally posted by : CA Pranjal Joshi | ||
|
|
Section 47 [(xiii) [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, |
|
Dear Pranjal
Would you be able to clarify whether Section 47(xiii) is applicable only to those cases where a partnership is converted into a company under Part IX of the Companies Act or the benefit of this section is also available to those companies as well where the company is specifically incorporated to acquire the business of a partnership. The acquisition of business in the latter case happens by way of business transfer agreement.
Amir
(Learner)
(4016 Points)
Replied 07 July 2010
Dear Sir,
Though ur question is directed to Pranjal Sir but I have not seen him from many days...may be he is busy with work and other commitments....
As far as ur question goes, I would say Sec 47(xiii) shall apply as long as those comditions are being satisfied.
I mean this company can be a new company or an existing one.
The benefit shall still be available even if "to takeover the partnership" was not the reason for the incorporation of the company provided 4 conditions as required by the proviso are satisfied.
CAclubindia
