Budget 2016: Existing provisions of clause (xiiib) of Section 47 provides that conversion of a private limited or unlisted public company into Limited Liability Partnership (LLP) shall not be regarded as transfer, if certain conditions are fulfilled, which, inter alia, include a condition that the company’s gross receipts, turnover or total sales in any of the preceding three years did not exceed Rs.60 lakh.
It is proposed to amend the said section so as to provide that, for availing tax-neutral conversion, in addition to the existing conditions, the value of the total assets in the books of accounts of the company in any of the three previous years preceding the previous year in which the conversion takes place, should not exceed five crore rupees.
These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.
Clause 28 of Finance Bill 2016
Clause 28 of the Bill seeks to amend section 47 of the Income-tax Act relating to transactions not regarded as transfer.
Sub-clause (A) of said clause seeks to insert a new clause (viic) in the said section so as to provide that any redemption of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, by an assessee being an individual shall not be considered as transfer.
Sub-clause (B) of the said clause seeks to insert a new clause (ea) in clause (xiiib) of the said section so as to provide a condition in addition to the existing conditions, that the value of the total assets in books of accounts of the company in any of the three previous years preceding the previous year in which its conversion into Limited Liability Partnership takes place does not exceed five crore rupees.
Sub-clause (C) of the said clause seeks to insert a new clause (xix) in the said section so as to provide that any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund shall not be considered as transfer for capital gain tax purposes.
It is also proposed to define the expressions “consolidating plan”, “consolidated plan” and “mutual fund” for the purposes of the proposed clause (xix).
These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017- 2018 and subsequent assessment years.