section 47 (Xiiib)

[vikas mehta]

[(xiiib) any transfer of a capital asset or intangible asset by a private company or unlisted public company (hereafter in this clause referred to as the company) to a limited liability partnership or any transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008[6 of 2009.]:

Provided that—

(a) all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership;

(b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion;

(c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership;

(d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent. at any time during the period of five years from the date of conversion;

(e) the total sales, turnover or gross receipts in business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and

(f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion.

Explanation.—For the purposes of this clause, the expressions 'private company' and 'unlisted public company' shall have the meanings respectively assigned to them in the Limited Liability Partnership Act, 2008[6 of 2009.]:

what is the meaning of business in clause (e) above. whether in an investment company dividend income will be considered as part of Rs 60 lakhs or no.?

AI Summary

Exploring Tax Implications Under Section 47(xiiib) for Converting Companies to LLPs and Related Exemption Queries A discussion on section 47(xiiib) of the Income Tax Act addresses the tax implications of converting a private or unlisted public company into a limited liability partnership (LLP). Key conditions include the transfer of all assets and liabilities, maintaining shareholder proportions in the LLP, and restrictions on profit distribution for a specified period. A query concerns whether dividend income counts towards the Rs 60 lakh turnover limit, with a response indicating exempted income under section 10 should not be included. Another inquiry involves the feasibility and tax implications of a company demerger and subsequent LLP conversion to avoid dividend distribution tax.