Capital Gain

This query is : Resolved

Saraswati (Querist)
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30 April 2008 There is a land in the name of individuals. The current owners of the land planning to set up a partnership firm (“the Firm”) and contribute the land in respect of the proposed development into the Firm as their capital share of capital contribution. The land contributed would be revalued by the firm based on a market valuation report and this amount would be credited to the current account of the partners. The Firm would be converted into a private limited company under Part IX of the Companies Act, 1956. On conversion, the partners would be issued shares in the Project Co in respect of their fixed capital account balances and the balance in the current account of the partners (representing the revaluation amount) would be recorded as a loan from the shareholders in the books of Project Co.

Saraswati

Saraswati (Querist)
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30 April 2008 Pls let me know whether the above transaction is possible and the impact of capital gain in the given situation.

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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30 April 2008 when land is transferred to the partnership firm then it is transferred if the partners share is less tha fifty % when the land is sold then capital gain tax is applicable but index cost is taken when land is trasferred to stock in trade
in your case pvt ltd co is incorporated & sares are given to the partners when land is sold or developed then partner will liable to capital gain tax shares which are issued is not important in my opinion

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