Conversion of proprietorship into the private limited

This query is : Resolved

Kaushik Vinod (Querist)
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16 January 2013 Dear Experts,

My Client is a Proprietorship firm since last 10 years but now they wants to float a Private Limited Company to continue their business.
The Firm has Net Assets of around Rs. 40 lacs which consist Building, Machines etc. My query is what is the best way to convert the assets and
Liabilities of the prop. Business into the Private Limited Company keeping in mind all the provisions of Income Tax Act and Company Law.
Please advice keeping in mind the latest change in the IT Act for issue of share at premium more the fair market value and the capital gain on the transfer
of the Assets and liabilities .

Guest

Guest (Expert)

16 January 2013 In my opinion so far as Income Tax is involved the transfer of assets on conversion of proprietorship into a private limited company is excluded from the definition of transfer and as such capital gains will not be charged on the conversion. Refer to the conditions attached to the provision.