Take over of properietory firm by pvt. company
This query is : Open
29 April 2013
Respected Sir,
There is one company A Ltd. having authorized and subscribed share capital of Rs. 1,00,000/- and another one proprietory firm of Mr. B. Mr. B is one of the director cum shareholder of A Ltd. also. Both are in same line of business of Clearing and forwarding.
Now sir, A Ltd. wants to take over the business of properitory firm of Mr. B. than My questions are :
1. I want to know what is the legal procedure and compliance under the income tax act and any other law ?
2. At what price the A Ltd. can purchase the assets of properitory firm of B means how the valuation of B's assets can be done and How the purchase consideration be calculated and discharged?
3. What is the position for Capital gain for Mr. B and how it can be calculated?
4. Is there any demerits for any of above?
5. How much Expenses are incurred for this procedure?
I hereby attached the balance sheet of properitoy firm for the reference.
The Abstract of Balance sheet of B is as under:
Capital : 2662790
sec. loan: 33868
curr. liability: 3133348
Fix asset : 325208
Curr. Asset: 5504798
Respected Experts, Kindly Reply soon it is important for me.
my email Id : cahirenjm@gmail.com or anjnakhant@gmail.com
There is one company A Ltd. having authorized and subscribed share capital of Rs. 1,00,000/- and another one proprietory firm of Mr. B. Mr. B is one of the director cum shareholder of A Ltd. also. Both are in same line of business of Clearing and forwarding.
Now sir, A Ltd. wants to take over the business of properitory firm of Mr. B. than My questions are :
1. I want to know what is the legal procedure and compliance under the income tax act and any other law ?
2. At what price the A Ltd. can purchase the assets of properitory firm of B means how the valuation of B's assets can be done and How the purchase consideration be calculated and discharged?
3. What is the position for Capital gain for Mr. B and how it can be calculated?
4. Is there any demerits for any of above?
5. How much Expenses are incurred for this procedure?
I hereby attached the balance sheet of properitoy firm for the reference.
The Abstract of Balance sheet of B is as under:
Capital : 2662790
sec. loan: 33868
curr. liability: 3133348
Fix asset : 325208
Curr. Asset: 5504798
Respected Experts, Kindly Reply soon it is important for me.
my email Id : cahirenjm@gmail.com or anjnakhant@gmail.com
29 April 2013
Dear Mr. hiren,
On your above quarry my observations are as follows :
(1) If A LTD take over total assets of the Mr. B properieotrship concer than following legal clarity will be required :
- first off it will be related party transaction hence you will required to find out the real value of all assets and liabilities because any over valuation or undervaluation will directly amount to breech of section 40A(2)(b).
- It is direct transaction with the shareholder of A Ltd and if A is majority sharegolder of the company than a care is required to be taken care that no additional gain is pass on to the him in consideration payable otherwise it can be considered as benefit to shareholder and may also attact Section 2(22)(e) on any excess payment made.
- It will also required to be observed by section of the companies act as well as place of profit regulation whereby special resolution will be required to be passed in AGM or EGM
- If the total paid up and subscribed share capital exceed RS. Crore than also approval from Central government will required to be obtained.
On your above quarry my observations are as follows :
(1) If A LTD take over total assets of the Mr. B properieotrship concer than following legal clarity will be required :
- first off it will be related party transaction hence you will required to find out the real value of all assets and liabilities because any over valuation or undervaluation will directly amount to breech of section 40A(2)(b).
- It is direct transaction with the shareholder of A Ltd and if A is majority sharegolder of the company than a care is required to be taken care that no additional gain is pass on to the him in consideration payable otherwise it can be considered as benefit to shareholder and may also attact Section 2(22)(e) on any excess payment made.
- It will also required to be observed by section of the companies act as well as place of profit regulation whereby special resolution will be required to be passed in AGM or EGM
- If the total paid up and subscribed share capital exceed RS. Crore than also approval from Central government will required to be obtained.
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03 May 2013
Thank you Mr. Vishrut
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