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Transfer of Pvt Ltd Assets to Proprietary

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There is a proprietorship of a person, and he and his wife are director in a private limited company. Now he wants to wind up the company and transfer the assets of the private limited company to the proprietor business he holds. kindly advise what will be the procedure for the same and tax implications.
Replies (4)

Transfer of assets from Proprietorship to Company is not regarded as transfer u/s 2(47), and therefore exempt. But your case is the opposite i.e. from Company to proprietorship, which isn't covered under the exemptions. Hence, Capital Gain will be attracted.

The WDV of the asset/block will be treated as the cost of acquisition and the actual consideration (unless it differs significantly from SDV/Fair Value) will be treated as Sale Consideration, and the difference will be taxable as Short Term Capital Gain.

If the same results in a loss, then the same will be adjusted against the profit of the company.

For the proprietorship business, the sale consideration will become the opening WDV and would be eligible for depreciation.

What is the procedure to do this? An agreement will be required?

Assuming that you have a Company Secretary, he's going to have to apply to the Registrar for Winding Up of the company, starting from passing a resolution for winding up of the company (instead of 'an agreement'). It has a series of steps that will have to be taken care of by your company secretary only, since the digital signature of a qualified CS has to be attached with the forms. Kindly hire a CS and let him take care of the process of Winding Up.

Thank you so much.


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