Conversion of prop ship into pvt ltd co
This query is : Resolved
Kishan Vaidya
(Querist)
08 October 2012
hello..my client is XYZ a proprietorship firm...Mr. X is a propritor..he wants to convert his "XYZ propritership firm" to "XYZ PVT. LTD COMPANY"...on the basis of SLUMP SALE....is there any capital gain or Business profession income will occure in this case
SANJAY TALATI
(Expert)
09 October 2012
Slump sale is possible if a separate unit
of the existing business is sold off without assigning the separate value to each and every asset.
In fact , in case of the conversion of the sole proprietorship concern into a pvt. ltd. company , there is an exemption from capital gain (not regarded as transfer for CG purpose) if all the assets and liabilities are taken over by the company and the share holding of the sole proprietor is not less than 50% of the total voting power of the Company and continues to hold the same for not less than five years and the sole proprietor receives entire sale consideration by way of acquiring the shares in a Pvt. Ltd. Company
of the existing business is sold off without assigning the separate value to each and every asset.
In fact , in case of the conversion of the sole proprietorship concern into a pvt. ltd. company , there is an exemption from capital gain (not regarded as transfer for CG purpose) if all the assets and liabilities are taken over by the company and the share holding of the sole proprietor is not less than 50% of the total voting power of the Company and continues to hold the same for not less than five years and the sole proprietor receives entire sale consideration by way of acquiring the shares in a Pvt. Ltd. Company
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