Conversion of sole proprietor into company

[RAJESH SANGHVI]

If a sole proprietor having its business as a builder desires to convert his business into a Pvt Ltd company. At what values should the closing stock of land be transfered to the company ? If it has to be tfd at market value, the will it amount to taxable business income for the sole proprietor. The sole proprietor will get more than 50% shares of the new company. Can the sole proprietor get salary from the company later.

AI Summary

Sole Proprietor Seeks Tax Exemption for Business Conversion; Must Meet Section 47 Conditions for Capital Gains Relief. A sole proprietor in the construction business seeks to convert his business into a private limited company and inquires about the valuation of land stock during the transfer. The reply advises that to qualify for capital gains tax exemption under Section 47 of the Income Tax Act, 1961, certain conditions must be met: all business assets and liabilities must transfer to the company, the sole proprietor must hold at least 50% of the company's voting power for five years, and no other benefits should be received apart from shares.