Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

REVALUATION OF ASSETS

18 December 2010

We have problem regarding the revaluation of the assets .. the problem that we are facing is .... we have a patnership firm we are trying to convert it to a company which is going to the IPO ..... so my problem here is that will it be better for the firm to first revalue the assets and later on convert.. the patnership firm to the company ...,. as the conversion is not considered transfer ... and the revalued asset can be directly credited to the partners accounts and it can be carried into the new company as ther shareholding .. KINDLY provide me a solution to it..and the need is in urgency

Reply
Follow
Share

2 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 18 December 2010

create a limited company and takeover the partnership firm by paying remuneration at current market price by cheque, this is the most simple way to avoid many litigations.
depute a chartered survayer for valuation as on the date of aquisition.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 19 December 2010

The followings are the conditions for availing the exemption from capital gains arising on conversion of partnership firm to a company.

(i) All assets and liabilities of the firm or AOP or BOI relating to the business immediately before the succession become the assets and liabilities of the company;

(ii) All the partners of the firm immediately before the succession become the shareholders of the company in the proportion of their capital accounts stood in the books of the firm on the date of succession;

(iii) The partners of the firm do not receive any consideration or benefit in any form, directly or indirectly, other than by way of allotment of shares in the company.

(iv) The partners of the firm together hold not less than 50% of the total voting power in the company, and their shareholding continues in such manner for a period of 5 years from the date of succession.

> Cost of Acquisition of the assets in the hand of company shall be same as in the hand of firm.

So no matter that revaluation of assets (for accounting purpose) made before or after conversion.