kailash (CA) (49 Points)
04 December 2009Situation : -
1. Transfer of capital assets from proprietary concern to Pvt. Ltd Company and
2. Proprietor having holding of shares 27.50% in the Pvt. Ltd Company and
3. Nature of business of both are same.
My question
1. Is it any capital gains arise or not
2. Guide me in all aspect Income Tax Act and companies Act.
P-A-W-A-N
(TAX - MANAGER AT GURGAON)
(541 Points)
Replied 04 December 2009
You Must Read the clouse (XXI) of SEC 47 following Items are not regarded as transfer..........
kailash
(CA)
(49 Points)
Replied 04 December 2009
dear Pawan, there is no any section - 47 (XXI ). I have know only Section - 47 ( XIV )
Ansari
(ca final)
(444 Points)
Replied 04 December 2009
It's not a transfer U/S 47(xiv) bcauz proprietor is holding less than 50% of the total voting power in the Company.
Hareesh H Sharma
(Cleared IPCC..now article)
(894 Points)
Replied 04 December 2009
Sec 47 (xiv) where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company :
Provided that
(a) all the assets and liabilities of the sole proprietary concern relating to the business immediately before the succession become the assets and liabilities of the company;
(b) the shareholding of the sole proprietor in the company is not less than fifty per cent of the total voting power in the company and his shareholding continues to remain as such for a period of five years from the date of the succession; and
(c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;
Hareesh H Sharma
(Cleared IPCC..now article)
(894 Points)
Replied 04 December 2009
Then i guess it wont be a problem sir..i just copied the section for u....
P-A-W-A-N
(TAX - MANAGER AT GURGAON)
(541 Points)
Replied 05 December 2009
OK...........B
It's not a transfer U/S 47(xiv) bcauz proprietor is holding less than 50% of the total voting power in the Company.
ut
Sunali
(Learner)
(1317 Points)
Replied 05 December 2009
| Originally posted by : P-A-W-A-N | ||
| " | OK...........B It's not a transfer U/S 47(xiv) bcauz proprietor is holding less than 50% of the total voting power in the Company. ut |
" |
No sir, if the shareholding of the sole proprietor falls below 50% then capital gain will arise..hence there will be a transfer in the said case..
Hareesh H Sharma
(Cleared IPCC..now article)
(894 Points)
Replied 05 December 2009
yup when the person holds 27.50% it will be a transfer and attract capital gains..and when its 57.50% it wnt be a transfer
Max Payne
(employed)
(2574 Points)
Replied 05 December 2009
What is covered U/s 47(xiv)? It is not the transfer of capital assets by a proprietor to his company. It is the SUCCESSION by a company of the proprietary business.
So it is transfer chargeable to tax whether the shareholding is 27% or 57%.
Hareesh H Sharma
(Cleared IPCC..now article)
(894 Points)
Replied 05 December 2009
| Originally posted by :G.K.. | ||
| " | What is covered U/s 47(xiv)? It is not the transfer of capital assets by a proprietor to his company. It is the SUCCESSION by a company of the proprietary business. So it is transfer chargeable to tax whether the shareholding is 27% or 57%. |
" |
Max Payne
(employed)
(2574 Points)
Replied 06 December 2009
| Originally posted by :kailash | ||
| " | Situation : - 1. Transfer of capital assets from proprietary concern to Pvt. Ltd Company and 2. Proprietor having holding of shares 27.50% in the Pvt. Ltd Company and 3. Nature of business of both are same. My question 1. Is it any capital gains arise or not 2. Guide me in all aspect Income Tax Act and companies Act. |
" |
Wel the query was transfer of capital assets from proprietary concern to Pvt Ltd Company.
Given that the business of both companies is same and there is already a pattern of shareholding now, at present, it is not a new company. To claim 47(xiv), the proprietorship must be succeeded by a company.
Hence a transfer chargeable to tax, since here only an asset is being transfer.
Bharat Khurana
(Student)
(153 Points)
Replied 10 December 2009
Yes capital gain shall arise. In case when properietorship concern is succeeded by a company and certain conditions are satisfied then there will be no transfer
CAclubindia
