| Question And Answer | |
|---|---|
| Subject: | implication of conversion of Charitable trust in to Sec. 8 Co under companies Act |
| Category: | Income-Tax |
| Querist: | Prakash Kulkarni |
| Answered by: | Research Team |
| Tags: | charitable trust, Company, limited Company |
| Date: | September 17, 2022 |
Assessee is charitable Trust under Bombay Public trust Act, having charitable objects in operation since last 15 years. Trust has immovable property as asset and also investment in Fixed deposits out of Funds created for specific purpose . The trustees have decided to convert the same in to Sec. 8 of the Companies Act, with Guarantee.
a. whether there are any tax implication under Income tax Act 1961 on such conversion.
b. whether any stamp duty is required to be paid.
There is no specific provision under section 47 of the Income-tax Act, 1961 (Act) dealing with a conversion of a charitable trust into a company under section 8 of the Companies Act, 2013.
However, assuming the transaction is considered as a transfer under the scheme of the Act, as per the computation mechanism provided under section 11(1A) of the Act, the assets could be transferred at a book value the capital gains are nil.
One has to study the implications of Chapter XII-EB ( Sections 115TD to 115TF of the Income -tax Act , 1961 )
In Maharashtra the permission of the Charity Commissioner is required .
Once the Charitable Trust is converted in to Company , condition of Registration granted under Income tax is also required to be satisfied .
As regards the stamp duty exemption the querist may have to make an application to competent Authority for granting the exemption under section 9 of the Bombay Stamp Act , 1858 . In Sozin Flora Pharma LLP v. State of Himachal Pradesh AIR 2021 Himachal Pradesh 44 the Court held that the identity of the firm as a legal entity changes , Stamp duty and registration fee cannot be levied upon conversion of a partnership firm to LLP. The Transfer of assets of firm to LLP is by operation of law. Whether the ratio can be applied is a debatable issue.