LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Capital gain

KRISHNARAJ P.R. (SR.MANAGER-ACCTS) (29 Points)

11 May 2012

1. I HAVE PUBLIC LIMITED COMPANY -CLOSELY HELD- THE COMPANY HAS LAND, AND HOUSE PROPERTY ONLY AND HAS CARRIED FORWARD LOSS.NOW WE WOULD LIKE TO CHANGE THE COMPANY INTO A LIMITED LIABILITY PARTNERSHIP -LLP , IF WE CONVERT DO WE HAVE TO PAY ANY CAPITAL GAIN ON THE PROPERTY-

2. AFTER CONVERTING, IF THE PARTNERS WOULD LIKE TO DISSOLVE THE LLP AND SPLIT THE ASSETS IN THEIR RESPECTIVE NAMES AS THEIR SHARE ,THEN AT THAT TIME DOES CAPITAL GAIN ARISE.IF SO GIVE DETAILS HOW TO GO ABOUT IT.

Reply
Follow
Share

1 Replies

Eshita S Shah (Practicing CA ) (75 Points)
Replied 12 May 2012

Hi Krishnaraj

There would be no Capital Gain Tax if the following conditions are satisfied as per Section 47(xiiib)

All the assets and liabilities of the Company immediately before the conversion shall become the assets and liabilities of the limited liability partnership;
All the shareholders of the Company immediately before the conversion shall become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in LLP should remain in the same proportion as their shareholding in the company on the date of conversion;
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;
The aggregate of the profit sharing ratio of the shareholders of the company in the LLP shall not be less than fifty per cent at any time during the period of five years from the date of conversion;
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
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.

If any of the above conditions are not satisfied then the amt of any profit or gains arising from such transfer shall be taxable in the previous year in which such conditions are not complied with

Accumulated Loss and Depreciation of the predecessor company can be carried forward by LLP subject to the compliance of the following conditions.

1 Like