ARIHANT BOTHRA (ARTICLE) (38 Points)
11 November 2009I have formed a company on 01.10.2009 to take over a proprietory firm. All the Provisions of Sec. 47 (xiv) of Income Tax Act, 1961 has been complied with.
Now, one of the greatest question which is bothering me is what will be the treatment of Depreciation in the hands of Company & Proprietor.
Pl. help with relevant provisions of the Income Tax Act, 1961
CA Rahul Jain
(CA)
(1162 Points)
Replied 11 November 2009
Hi Arihant,
As per sec 32 of IT Act, 1961, when there is amalgamation or conversion as such, firstly, depreciation shall be computed in normal manner. Then, the depreciation is apportioned to both the concerns on the basis of the no. of the days the assets has been used by them.
if still and doubts haunt u, plz revert.
Regards
Sunil
(Trader)
(2611 Points)
Replied 11 November 2009
Hi Arihant.
You have to take over the entire business of the proprietor (all assets and liabilities) as on the date. the problem will come up if there is any immovable property being building. You will be paying stamp duty on the market value and your 51% share holding of proprietor in Pvt. Ltd. will hinge on this value for shares alloted and not the wdv. Eventually if you are not paying tax on CG by keeping the shares locked in for 5 years, the Capital Gain will still be computed and taxed in the hand of company if shares are diluted in the lock in period. I am not sure which value you have to take when calculating further depreciation on building. However I will check up with transaction done for an MIDC property this way and if no one else has cleared this position, I will let you know. Situations are different in various types of transfers (agreement to sale or assignment of lease) and one has to see what valuation the Stamp Officer takes of the constructed building.
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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