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TAX BENEFITS ON CONVERSION OF COMPANY INTO LLP

APRIL 23, 2012 BYALOK PATNIA

On conversion of a Private Limited/ Public Company into Limited Liability

Partnership (LLP) various tax benefits are being provided. A LLP can avail numerous tax benefits on its

conversion from Private/ Public Company. Some of the benefits to be availed by LLPs are as follows

Transfer of assets

Both tangible and intangible assets gets transferred from the Public/ Private

Company to the newly formed LLPs.

In order to avail the aforesaid exemption, the following conditions underSec 47(xiiib) should be fulfilled

All assets and liabilities of the company becomes the assets and liabilities of the LLP.

No consideration other than share in profit and capital contribution in the LLP arises to partners.

A total sales, turnover or gross receipt in the business of the company does not exceed Rs. 6000000

in any of the three preceding years.

All the shareholders of the company becomes partners in the LLP in the same proportion as their

shareholding in the Company.

No amount is paid either directly or indirectly to any partner out of the accumulated profit of the

company on the date of conversion for a period of 3 years from the date of conversion. The shareholders of the company continue to be entitled to receive at least 50% of the profits of the

LLP for a period of 5 years from the date of conversion.

Business losses Carry forward and set off of the business losses and unabsorbed depreciation of

the predecessor Company is allowed to the successor LLP only if the above mentioned conditions in

sec 47(xiiib) have been fulfilled.

Cost of assets Actual cost of the block of assets of a successor LLP shall be the written down

value (W.D.V.) of the block of assets of the predecessor Company on the date of conversion.

Cost of acquisition of Capital Assets The cost of acquisition of the capital assets for the

successor LLP shall be deemed to be the cost for which the predecessor company had acquired

such capital asset. Amortization benefits If the conditions mentioned above in sec 47(xiiib) are fulfilled, then the

benefits of amortization of expenses in relation to Voluntary Retirement Scheme shall be available to

the LLP as if no succession has taken place.

No MAT credit since there is no MAT on LLP, tax credit of the MAT paid by the Company shall not

be allowed to the LLP.

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