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Miltiple LLPs and one Pvt Ltd Co

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Jayanta Bandyopadhyay

418 Points Posted on 10 September 2023

One Pvt Ltd Co , having manufacturing and assembly set up, is internally selling to multiple LLPs[ all directors and their spouses in different combination] , who are in turn exporting. Is such tax planning is permissible one? Is it to split turnover among many LLPs and take tax break in initial years? Is it legally permissible?

Pl guide.

Replies (2)

Quick Summary

This discussion examines the tax planning strategy where a private limited company sells goods to multiple Limited Liability Partnerships (LLPs), all directed by the same individuals and their spouses, for export purposes. It questions whether this structure is legally permissible, particularly concerning potential turnover splitting for tax benefits in early years. The advice covers related-party transaction rules under the Companies Act, GST valuation for related entities, and income tax considerations like Section 40A(2) and Specified Domestic Transactions.

sabyasachi mukherjee

Profession

19978 Points Posted on 11 September 2023

Pvt. ltd. company

Aashok Kumar Sharma

Finance/Compliance Consultant

75648 Points Posted on 08 November 2026

Related-party sales between a company and family LLPs:

• Sales by the company to related LLPs are related party transactions (Sec 188 CA 2013): board approval, with members' approval above thresholds unless at arm's length and in the ordinary course. Disclose in AOC-2 and the notes (AS 18 / Ind AS 24).

• GST: if the LLPs and the company are related persons (Sec 15 Explanation), the value is the open market value (Rule 28). If the recipient gets full ITC, the invoice value is deemed OMV.

• Income-tax: Sec 40A(2) can disallow excessive payments to related parties. Specified domestic transactions (SDT) under transfer pricing apply only if a party claims profit-linked deductions (and above Rs 20 crore).

• Check for profit-shifting concerns (e.g. one entity under a lower tax regime like 115BAB).