Exemption to facilitate the Conversion Of Partnership Firm into a Company in case of NRI
[Capital Gain of an NRI could be Completely Exempt from Income Tax]
Full exemption is allowed in respect of capital gains on the conversion of a partnership firm into a company, under Section 47(xiii). Thus, it is provided that where a firm is succeeded by a company in the business carried on by it as a result of which the firm sells or otherwise transfers any capital asset, or intangible assets to the company, the entire capital gains would be exempt from tax provided the following conditions are full field:
All the assets and liabilities of the firm relating to business immediately before the succession become the assets and liabilities of the company;
All the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession;
The partners of the firm do 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: and
The aggregate of the shareholding in the company of partners of the firm is not less than 50% of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of succession. This has been extended to a stock exchange converted into a company, as per SEBI approval for de mutualisation or corporatization where the transaction would not be treated as “transfer” under Section 47(xiiia) from the A.Y. 2004- 2005.
Capital Gain of an NRI could be Completely Exempt from Income Tax
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.
The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications