Capital gains exemption for firm-to-company succession applies only when asset transfer, shareholding, and voting power conditions are met. Transfer of a capital asset or intangible asset by a partnership firm to a company on succession of the firm's business is not regarded as a transfer where the prescribed conditions are satisfied. Those conditions require transfer of all business assets and liabilities to the company, conversion of all partners into shareholders in the same proportion, no consideration other than shares, and continuation of at least 50% voting power for five years. The transferee's cost is the previous owner's cost of acquisition.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Capital gains exemption for firm-to-company succession applies only when asset transfer, shareholding, and voting power conditions are met.
Transfer of a capital asset or intangible asset by a partnership firm to a company on succession of the firm's business is not regarded as a transfer where the prescribed conditions are satisfied. Those conditions require transfer of all business assets and liabilities to the company, conversion of all partners into shareholders in the same proportion, no consideration other than shares, and continuation of at least 50% voting power for five years. The transferee's cost is the previous owner's cost of acquisition.
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