Mumbai ITAT holds that no
taxable capital-gain arises upon conversion of a private limited company into
assessee-LLP as the assets/liabilities were transferred at book value however,
holds that the conversion amounted to taxable transfer u/s. 45 by virtue of
Sec. 47(xiiib) conditions not fulfilled; Assessee had admitted that it violated
clause (e) of the proviso to Sec. 47(xiiib), observes that since the entire undertaking
of the erstwhile company got vested into the LLP, no separate cost other than
the ‘book value’ was attributable to the individual assets and liabilities;
Affirms assessee’s stand that since transfer of the assets and liabilities of
the erstwhile company took place as per the Limited Liability Partnership Act,
2008 (LLP Act) at the ‘book value’ itself, the difference between the transfer
value and the cost of acquisition being ‘Nil’ would render the machinery
provision of computing ‘capital gains’ unworkable; However, rejects assessee’s
stand of ‘no transfer upon conversion’, also rejects AO’s invocation of Sec.
47A(4) for disallowing assessee’s claim of exemption in the year of claim
itself, clarifies that “the same comes into play only for the purpose of
withdrawing an exemption earlier availed by an assessee u/s. 47(xiiib)…”;
Separately, denies carry forward to successor LLP of losses of the erstwhile
company dehors satisfaction of Sec. 47(xiiib) conditions, rejects assessee’s
reliance on LLP Act provisions, clarifies that “Sec. 58 of the LLP Act…has
nothing to do with the ‘carry forward‘ of losses, which is the creature of a
specific statute in the form of the Income-ax Act, 1961.”:ITAT
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