CA Mohit Daga (Looking for a job) (25 Points)
04 December 2009Please suggest me regardign the tax treatment of revaluation reserve when a partnership firm is converted into a company and the assets are revalued above the book value of the assets of the firm...
all the conditions regarding the transfer not regarded as transfer us 48 of income tax act are compled for example the share holding of partners in the company not coming down to less that 50%
please reply in urgent need of the same.
Mohit Daga
Shashi Bhushan
(Learner, Jalandhar)
(996 Points)
Replied 04 December 2009
in India there is no practice of showing deferred tax on revaluation reserve.
Sunil Liladhar Kotak
(Manager (F & A))
(2025 Points)
Replied 05 December 2009
Sorry but i am not getting your question
as because when the whole transaction is exempt i.e. not considered as the transfer then where comes the question of tax
sunil
santhosh
(CA)
(636 Points)
Replied 05 December 2009
So long as the Conditions are satisfied the whole transfer is not regarded as Transfer under section 47 and therefore ,no Question of taxability
CA Mohit Daga
(Looking for a job)
(25 Points)
Replied 05 December 2009
this is because i ll revalue the assets of the firm before converting it into a co. so not sure if that revaluation ll be considered as an income in the hands of the firm of what...
let me give u example we have a firm with assets of rs. 100 with now i revalue the assets at rs 900 creating a revaluation reserve of rs. 800 and convert this whole Rs. 900 into the share capital of the company.. 90 shares of Rs. 10 paid up will i be charged any tax regarding that Rs. 800 which i revalued... i think this ll clearify u regarding the question...
santhosh
(CA)
(636 Points)
Replied 05 December 2009
Creation of Revaluation Reserve is not taxable.
Implications in MAT
ndo Rama Synthetics (I) Ltd Vs CIT (Dated: September 22, 2009) Income tax - MAT provisions - Sec 115JB - Assessee is into manufacture of yarn and polyester - computes book profit after reducing the net profit by the sum withdrawn from the revaluation reserve created on revaluation of the fixed assets - AO disallows - held, there is no infirmity in the Tribunal's order. After the insertion of the proviso to clause (i) of explanation to section 115JB of the Act, the assessee has been deprived of the benefit by clearly mandating that in case the amount of such reserve has not been added back by the assessee in AY 2000-01, i.e. when the assessee company created the revaluation reserve while computing the book profit for that year, then the amount is statutorily to be included while computing the book profits under section 115JB of the Act. Assessee's appeal dismissed:DELHI HIGH COURT;
CA Mohit Daga
(Looking for a job)
(25 Points)
Replied 05 December 2009
thank you santosh but the reserve ll be in the books of the firm not the co. n i think that it ll be added to the capital of the partners(thats the reason of the doubt) cos have not seen any reserves in the b/s of a partnership firm...
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