Page 323 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning Manpreet Kaur, Lovely Professional University

Notes Unit 14: Restructuring: Conversion and Slump Sale

CONTENTS
Objectives
Introduction
14.1 Conversion of Sole Proprietary Business into Company
14.2 Conversion of Partnership Firm into Company
14.2.1 Advantages of Conversion
14.2.2 Requirements for Conversion
14.3 Slump Sale
14.3.1 Key Characteristic Features of Slump Sale
14.3.2 Chargeability
14.3.3 Steps in Slump Sale
14.3.4 Taxability of Gains Arising on Slump Sale
14.3.5 Trade-off between Itemised Sale and Slump sale
14.4 Transfer of Assets between Holding and Subsidiary Company
14.5 Summary
14.6 Keywords
14.7 Review Questions
14.8 Further Readings

Objectives

After studying this unit, you will be able to:

Discuss the conversion of sole proprietary business into company

Describe the conversion of partnership firm into company
Explain the concept of slump sale
Elucidate the transfer of assets between holding and subsidiary company

Introduction

The sole proprietorship is a completely separate legal form from a company and the law does not
provide any process for conversion from one form to the other. Where a firm is converted into a

company and as a result of such conversion, the firm transfers any capital asset (whether tangible
or intangible) to the company. Slump Sale is one of the widely accepted ways of conducting
business transfers. In relation to a capital asset being an undertaking or divisions transferred by
way of such sale, the ‘net worth’ of the undertaking or the division shall be deemed to be the cost
of acquisition and cost of improvement. A company controlled by a Holding Company is called
a Subsidiary Company. So, before one can embark on a study it is absolutely vital to understand
the conversion of Sole Proprietary Business into Company and Partnership Firm into Company,
the concept of Slump Sale and transfer of Assets between Holding and Subsidiary Company.
The purpose of this unit is to enable the students to comprehend basic expressions. Therefore,

all such basic terms are explained and suitable illustrations are provided to define their meaning
and scope.

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