| Question And Answer | |
|---|---|
| Subject: | section 9B and amended section 45(4) |
| Category: | Income-Tax |
| Querist: | Subodh Vora |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | and 45(4), conversion of firm, Section 9B |
| Date: | January 16, 2022 |
Finance Act 2021 has introduced new provision of taxation on transfer of capital asset or stock in trade on dissolution or reconstitution of Partnership Firm and AOP vide new section 9B and amended section 45(4),
A conversion of a Partnership firm under Chapter XXI of the Companies Act 2013 may not result into reconstitution of Firm or AOP. Hence above provisions may not attract ?
This would mean that if self generated Gooldwill is bought into firms book by crediting partners capital acount and there after converting this firm into PVT LTD may not attract any tax ?
Section 56(2)(10) will be applicable in the hands partners ?
The conversion of a Partnership Firm into a Company does result in dissolution of the Firm. However, as there is no Capital Asset or Stock in trade or both being transferred by the Firm to the Partners, section 9B of the Income-tax Act, 1961 would not be attracted.
The shares issued to the partners should be as per Rule 11U and Rule 11UA of the Income-tax Rules 1962 so as to not attract any additions in the hands of the Partners under section 56(2)(x) of the Act.