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.

AI Summary

Client's Company Faces Tax Exemption Issue for LLP Conversion; Section 47(xiiib) Misapplied to Current Scenario A client seeks to convert an unlisted public company into a Limited Liability Partnership (LLP). The company's financials include share capital and securities premium of 1 crore each, and a revaluation reserve of 8 crore. The land, initially valued at 2 crore, is now valued at 10 crore due to revaluation. Under Section 47(xiiib), tax exemption on conversion requires the asset value not to exceed 5 crore in the last three years. The query asks if the original land cost allows compliance and the implications if conversion proceeds without meeting this condition. The reply notes that Section 47(xiiib) pertains to partnership to company conversion, not the current case.