Dear Friends,
LLP Act allows only individuals and body corporates to be partner of LLP. A private limited company is having HUF shareholders also. How can such company be converted into LLP.
CA Jinesh Jain
Reply:1
Dear CA Jineshji
Jai Jinendra
As a cardinal principal of law we have to abide bvy the principals of law enunciated which we propose to follow.
Under the circumstances, pl transfer the shares from HUF to other eligible persons and then get the pvt ltd. co.into LLP.
Regards
CMA & CS S K JAIN
Reply:2
Dear Jainji,
Jai Jinendra.
Thank you for responding to the query. I had raised this issue for discussion in the forum since I had come accross advise by some members to their clients that HUF can become partners in LLP and/or gift by HUF to its members are covered under the definition of relative under section 56.
I would take the discussion a step further for the benefit of all.
The book value of the shares of the Pvt. Ltd. Co. is Rs. 500/- against the face value of Rs. 10/-. If such shares are transferred to other eligible person, huge income tax liability on Long Term Capital Gains arise. Even if the shares are transferred to the karta or other coparcners of the HUF, to my mind the transaction is covered under section 56 (1) (vii). In this respect, I would like to mention that the sub clause (ii) inserted in the above section (for definition of relatives in case of HUF) w.e.f. 1.6.2010 covers only if the receiptant is HUF from its members and not vice versa.
Though recently, the Rajkot Bench in the case of Vineetkumar Raghavjibhai Bhalodia vs ITO, Rajkot Ward 5(4) vide its order dated 17.05.2011 has decided in favour of the assessee by surmising that HUF is a group of relatives and gift by HUF to the member is covered under the definition of relative for the purpose of section 56(2)(v).
However, the revenue has preferred an appeal against the above order and the appeal has been admitted by Hon'ble Gujrat High Court on 23.10.2012. The decision is still pending.
CA Jinesh Jain
Reply:3
Dear CA Jineshji
Jai Jinendra
I discussed the law under the LLP Act and what the LLP Act required you to do. In case of any other difficulty in relation to any other law the LLP Act does not take care unless the LLP Act is modified.
We have to take care of all the aspects of law andnot only the LLP law and accordingly one has to take a concerted decision for best implementation of the law in our action.
I thank you for theinformation pro0vided in realation to the Income Tax Act which will be a knowledge for the undersigned.
Regards
CMA & CS S K JAIN
(0)9830492422
LLP Act allows only individuals and body corporates to be partner of LLP. A private limited company is having HUF shareholders also. How can such company be converted into LLP.
CA Jinesh Jain
Reply:1
Dear CA Jineshji
Jai Jinendra
As a cardinal principal of law we have to abide bvy the principals of law enunciated which we propose to follow.
Under the circumstances, pl transfer the shares from HUF to other eligible persons and then get the pvt ltd. co.into LLP.
Regards
CMA & CS S K JAIN
Reply:2
Dear Jainji,
Jai Jinendra.
Thank you for responding to the query. I had raised this issue for discussion in the forum since I had come accross advise by some members to their clients that HUF can become partners in LLP and/or gift by HUF to its members are covered under the definition of relative under section 56.
I would take the discussion a step further for the benefit of all.
The book value of the shares of the Pvt. Ltd. Co. is Rs. 500/- against the face value of Rs. 10/-. If such shares are transferred to other eligible person, huge income tax liability on Long Term Capital Gains arise. Even if the shares are transferred to the karta or other coparcners of the HUF, to my mind the transaction is covered under section 56 (1) (vii). In this respect, I would like to mention that the sub clause (ii) inserted in the above section (for definition of relatives in case of HUF) w.e.f. 1.6.2010 covers only if the receiptant is HUF from its members and not vice versa.
Though recently, the Rajkot Bench in the case of Vineetkumar Raghavjibhai Bhalodia vs ITO, Rajkot Ward 5(4) vide its order dated 17.05.2011 has decided in favour of the assessee by surmising that HUF is a group of relatives and gift by HUF to the member is covered under the definition of relative for the purpose of section 56(2)(v).
However, the revenue has preferred an appeal against the above order and the appeal has been admitted by Hon'ble Gujrat High Court on 23.10.2012. The decision is still pending.
CA Jinesh Jain
Reply:3
Dear CA Jineshji
Jai Jinendra
I discussed the law under the LLP Act and what the LLP Act required you to do. In case of any other difficulty in relation to any other law the LLP Act does not take care unless the LLP Act is modified.
We have to take care of all the aspects of law andnot only the LLP law and accordingly one has to take a concerted decision for best implementation of the law in our action.
I thank you for theinformation pro0vided in realation to the Income Tax Act which will be a knowledge for the undersigned.
Regards
CMA & CS S K JAIN
(0)9830492422
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