Forming a company to take over a firm

This query is : Resolved

Guest

Guest (Querist)

10 April 2017 We have a partnership firm and the partners have decided to convert it to a Private Limited for expansion of business. Since there are only three partners it could not be converted, as 7 partners are required for conversion.

Now here are my doubts.
1. Can a private limited be formed by the existing three partners to take over the existing firm? Any case laws to support such decisions?
2. Will Capital gain arise out of such transfer?

It will be great if someone can throw a light on these matters.

CA. Amit G. Chandani

CA. Amit G. Chandani (Expert)
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10 April 2017 Minimum 7 persons are needed for conversion of partnership firm into company.
Capital gain is not applicable, provided condition u/s 47(xiii) of Income Tax Act, 1961 are satisfied.