| Question And Answer | |
|---|---|
| Subject: | Can a LLP go for Demeger to a Pvt Indian/Foreign company or another LLP |
| Category: | Income-Tax |
| Querist: | A |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Limited liability partnership, LLP, LLP demerger |
| Date: | November 21, 2022 |
Can a LLP go for Demeger to a Pvt Indian/Foreign company or another LLP
The Limited Liability Partnership Act, 2008 does provide for merger or restructuring of two LLPs through the National Company Law Tribunal’s approval process.
However, the Income-tax Act, 1961 does not provide any specific exemption for demerger of LLPs as it does for demerger of companies. Then again, if the transaction is tax neutral, there would not be any requirement for a specific exemption.
It would be important to note that the Hon’ble NCLT Chennai Bench in the case of Real Image LLP with Qube Cinema Technologies Private Limited (CP/123/CAA/2018 dated June 11, 2018) had approved an amalgamation of an LLP and a private limited company. However, the Hon’ble NCLAT in the case of Regional Director & Anr v. Real Image LLP & Anr CAAT No. 352 of 2018 dated December 04, 2019 set aside the order of the NCLT holding that on reading of the provisions of Act 2013 as a whole in reference of conversion of Indian LLP into Indian company there is no ambiguity or absurdity or anomalous results which could not have been intended by the legislature.
Therefore, the LLP might have to register as a company and then demerge itself.