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conversion of firm into LLP

Started by ketanvyas1975, August 16, 2012, 07:33:13 PM

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Dear Friends,

I have following queries in the matter of conversion of firm into LLP

(1) There is no specific exemption from capital gain. However, firm and LLP both are to be treated as firm for the purpose of income tax assessment. Does it mean that there is no change in entity and hence no capital gain?

(2) New PAN of the LLP to be taken after conversion or the old PAN of the firm will continue to apply to the LLP?

(3) whether two set of accounts i.e. one for the firm and another for the period of LLP to be prepared or only one set of books will suffice.

(4) only one combined return is to be filed or two returns i,e, one for firm and one for LLP to be filed?

Kindly advise and share your valulable views.

Thank you to all in advance.


1.  section 47 (xiii) providing for tax free transition of firm into a company was inserted in the Act from the assessment year 1999-2000. However, the courts have maintained that there are no capital gain consequence on the conversion of a firm into a company under Part IX of the companies Act, 1956 . Applying this to the case under consideration it can be said that no capital gain consequence will follow. The requirements of the Second Schedule to the LLP Act, 2008 must be adhered to in order to get away from the rigours of the capital gains tax.
2. New PAN would have to be obtained.
3. Separate return for firm upto date of transmission into LLP wld have to be filed.