Conversion of Company into LLP

[ROHIT GOEL]

Hi Sir,

One of our clients is looking to convert their Unlisted Public company into a LLP.

A summary of their financial position is as under:

Equity & Liabilities

Share Capital-Rs. 1 crore,

Securities premium-Rs. 1 cr,

Revaluation Reserve- ₹ 8cr.

Assets

Land (Original cost 2cr)- 10 cr

Now as per section 47(xiiib), to claim exemption from income tax on conversion into LLP, the value of assets of the company in any of the last 3 years should not exceed 5 crs. My question is since in our case, actual cost of land was only 2cr and it was only shown at 10cr due to revaluation, can we claim compliance with such condition?

At the alternate if we proceed with conversion without complying with such condition, what would be the sale consideration for such transfer of the capital asset being land since no actual consideration will be there.

[DR.MARIAPPAN GOVINDARAJAN]

Section 47(xiiib) deals with the conversion from partnership to a company. But your case is different.

AI Summary

Section 47(xiiib) applicability is limited; it addresses partnership-to-company conversion, not company-to-LLP conversion; revaluation treatment unresolved. The inquiry asked whether a revalued land amount should be counted for exemption under Section 47(xiiib) on conversion of a company into an LLP and how sale consideration for the land would be determined if the condition were not met. The sole reply states that Section 47(xiiib) pertains to conversion from partnership to company and is not applicable to company-to-LLP conversion; no further guidance on revaluation treatment or sale consideration is given.