• Capital gains on Sale of company owned industrial plot and winding up procedure

Our pharmaceutical private limited company was incorporated in 2004 with Rs 10 lakh paid up capital and there are just two shareholders me and my wife.
The company had bought an Industrial plot in 2005 which was sold in Dec 2022. The company has about 75 lac in the bank from the sales proceeds of the land. 
Due to fallout with the consultant the company did not have any sale purchase operations, never registered with GST etc. 
We wish to now wind up the company as I am now a senior citizen,retired and no longer keen on starting a business. The company does not have any assets except for the bank balance and no creditors, debtors or liabilities and ROC filings are up to date.

My questions are:

1. Will the proceeds received from sale of company property be treated as long term capital gain and if he company has to pay capital gains tax on he profit it made?
2. What will be a better option: Getting the company struck off OR go for NCLT (which is very expensive and I would like to avoid)
3. How to transfer the funds to the share holders before getting it struck off (in case striking off is an option)
4. Will selling the company (will need help on how to find a buyer) be a faster and tax saving option to winding up the company.

I will be ever so grateful for an answer and would also like to get the services of a CA/CS to execute the winding up. Thank you.
Asked 13 days ago in Capital Gains Tax

Hello Sir

 

1)  There would be long term capital gains taxed at the rate of 20% with indexation

2)  The striking it off is better option considering here the application is made to the ROC for that and it takes approximately 3-4 months to get it wound-up. 

3) The funds can be transferred either by way of dividend or by selling of the company

 

 

We can assist you with winding up process. We can provide the detailed consultation for the same. 

Prerna Peshori
CA, Pune
117 Answers
1 Consultation

5.0 on 5.0

1. if you have ever claim depreciation on it or show it under block os asset under income tax it will be consider as short term gain otherwise it will be treated as long term gain and you can claim benefit

 

2. Better to struck of company or sell it to soemone looking for running company

 

3. you can use it via various ways as per your personal tax status - remuneration, dividen, buy back of shares, dissolution

 

4. We can help to find buyer, yes if done its fastest option without any other hassle

 

We can help you with all the service, transaction planning, taxation compliance, closure of company or selling off for company, can connect to work out best solution asap

Vishrut Rajesh Shah
CA, Ahmedabad
857 Answers
34 Consultations

5.0 on 5.0

Yes if the land was shown as capital asset and not stock in trade then same will be treated as capital gain.

You can easily wind up the company I dont think NCLT is mandatory.

You can either show salary payment to director or dividend to shareholder which will attract double tax. Hence the choice is yours on how you can do that. It would have been advisable if you would have first converted it into LLP and then sold.

Yes selling company would be a better option but it is difficult to find a buyer for a company with just cash in bank account.

 

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4108 Answers
76 Consultations

5.0 on 5.0

You can go for voluntary liquidation of the company under Insolvency and Bankruptcy Code (IBC) by following the legal process. As you don't have any immoveable properties, the voluntary liquidation will be comparatively simple, though it takes about 1 year.  Getting struck off by the RoC arises if you are not complying with the compliance requirements, which may still attract penalties. 

As the deposit represents accumulated profits on sale of land, the distribution to the shareholders can be by way of dividends, which becomes taxable. However, if the same is received on liquidation, the proceeds may not be taxable, depending upon the facts of the case. 

Selling the company to an interested buyer is the best option you can explore as you may not need to undergo lengthy and complicated compliance related issues. It will also help you to realise the value of your shares. 

In the case of voluntary liquidation under IBC,  you need the services of a company secretary/chartered accountant, an insolvency professional, a Registered valuer and perhaps a legal counsel for representation before the NCLT.  The cost may approximately be Rs 10 Lakhs. 

B Vijaya Kumar
CA, Hyderabad
977 Answers
124 Consultations

5.0 on 5.0

1. Yes gain from sale of land would be treated as long term capital gain. Co. would be liable to pay tax @20.8%.

2. Struck off. As you have sold the property in Dec.2022 you can file the application after three months from the date of sale of the land.

3. Before filing application for struck off all the liabilities should be extinguished

4. Finding a buyer will be a time consuming process

 

For detailed discussion you may opt for a phone consultation

Vivek Kumar Arora
CA, Delhi
4556 Answers
681 Consultations

5.0 on 5.0

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