Reconstruction and Restructuring (merger and

slide1. Reconstruction and Restructuring (merger and corporation ) – Important issues under I.T. Act, 1961 Saturday , 05.10.2024
The Park
Kolkata
EIRC of ICAI Pradip N. Kapasi Chartered Accountant<br>
slide2. Synopsis -I Insolvency & Bankruptcy Code, 2016 – Interplay With ITA
Buy-back of shares
Gift by company
Slump sale
Amalgamation
Demerger
Company to LLP 2 Pradip N. Kapasi Chartered Accountant<br>
slide3. Synopsis - II Corporatisation
Part XXI of Companies Act, 2013
Firm to company
Proprietary concern to company
Firm to LLP
Holding – Subsidiary – Holding
Liquidation
Deemed dividend
Case Studies 3 Pradip N. Kapasi Chartered Accountant<br>
slide4. IBC & ITA – IS.2(24), 4, 5, 28(i)(iv), 41(i), 43B, 45, 56, 79, 115JB, 140, 170, 170A, 178 and 194R Rebates Reliefs and Waivers by NCLT/ AT
Sundry creditors for goods
Sundry creditors for services
Labour dues
Outstanding interest payable
Advances against goods
Deposits
Cash credits and overdrafts
Secured loans
Unsecured loans
Government dues
Issue of shares against liabilities 4 Pradip N. Kapasi Chartered Accountant<br>
slide5. IBC & ITA - II Profits and gains on sale of assets
Unabsorbed depreciation
Unabsorbed loses and S.79
IBC expenses
Minimum Alternative Tax, post IBC effects
TDS u/s 194R
S.30 and s.238 of IBC
Resolution plan and order of NCLT
AS and Ind AS 109 5 Pradip N. Kapasi Chartered Accountant<br>
slide6. IBC & ITA - III Press Release and FA, 2018
Circular No.18 dated 10.09.2022
Circular No. 12 dated 16.06.2022
GST implications
Types of Resolutions
Clean slate concept 6 Pradip N. Kapasi Chartered Accountant<br>
slide7. Buy-Back of Shares -I(S. 2(22)(f), 46A, 57) W.e.f. 1st October 2024
Dividend to include –
any payment
by a company (to a shareholder)
in purchase of
from a shareholder
its own shares (any type)
as per S. 68 of Companies Act, 2013
Clause (iv) omitted from exclusions
Computation of Capital Gains as per S.46A
Buy Back to be transfer of shares
FVC deemed to be nil
Resulting loss and s.70 & s.71 7 Pradip N. Kapasi Chartered Accountant<br>
slide8. Buy-Back of Shares -II No deduction from amount taxed u/s 2(22)(f)
not even 1/5th of expenses
No Tax exemption u/s 10(34A) for income on buy back
No BBT u/s 115QA for buy back taking place
on or after 1.04.2024
TDS u/s 194 @ 10% w.e.f. 01.10.2024 8 Pradip N. Kapasi Chartered Accountant<br>
slide9. Buy-Back of Shares –III To Note
set-off and carry forward of loss – anomalous examples in EM
year of receipt and payment –inconsistencies in 3 provisions
entire receipt is dividend
applicability only to buy back of shares
other securities not covered
cases of non-s.68 payments
Anarkali Sarabhai, 224 ITR 422(SC)
relevance of Rule 40BB
higher rate of tax for non-companies
benefit of s. 80M for companies
accumulated profits & Explanations
dividend and DTAA, RST 348 ITR 368 (AAR)
Cognizant Technology Solutions India (P.) Ltd, 416 ITR 462(Mad.)
opting - out ; effect
any type of shares
higher buy back price
better option for legislature
G. Narasimhan [1999] 236 ITR 327 (SC) 9 Pradip N. Kapasi Chartered Accountant<br>
slide10. Gift by company – I(S. 47 (iii)) Amendment of 2024 w.e.f. 01.04.2025
Transfer by an individual or HUF
Of capital asset
Under a gift or will or an irrevocable trust
Not regarded as a ‘Transfer’
On amendment restricted to individual and HUF
Omission of Provision for excluding ESOP
Substitution w. r. effect of a similar clause
Exempting transfer including for ESOP for all assesses 10 Pradip N. Kapasi Chartered Accountant<br>
slide11. Gift by company - II Implication of amendment
Intention to bring to tax perceived gains as “capital gains”
To hold gift as a case of transfer
Mandatory computation of capital gains u/s 48
FVC minus COA/COI and expenditure
Factually no FVC agreed, received, receivable, accrued or arisen
FVC as per deeming fiction of s.50 C, CA, D
Wisdom of s. 45 –profits and gains – accrual or arising
no consideration moving in case of gift
transfer without right to receive FVC in case of gift
without accrual and profits & gains
deeming fiction to apply only on some accrual – Re. 1
possible substitution of Re. 1 11 Pradip N. Kapasi Chartered Accountant<br>
slide12. Gift by company - III Capital gains on gift by non-exempt persons
money; FVC- COA = Nil
shares; 50CA FVC – COA
land & building ; 50C- COA
other assets; agreement value or actual receipts
where FVC not determinable - s.50D
Deduction for COA in all cases
Case of Family settlement
Independent of amendment in s.47(iii)
Kay ARR Enterprises, 97 ITD 291 (Chennai) 12 Pradip N. Kapasi Chartered Accountant<br>
slide13. Gift by company - IV Did s.47(iii) stated the obvious before amendment
Case of over legislation
Taxation in hands of Donee
Receipt of gifts
Recipient based tax under s. 56(2)(x)
Receipt by Family Trust
Effect of omitting of Proviso for ESOP
Position for Gifts up to 31.03.2024
Bakhtavar Construction Co (P) Ltd 459 ITR 402 (Bom.)
DP World (P) Ltd. 162 TTJ 0446 (Mum)
Gujarat Infrapipes (P) Ltd. ,111 ITR (Trib) (S.N.) 47 [Ahm.])
Reddington, 430 ITR 298 (Mad.)
Jai Trust, 160 taxmann.com 690 (Bom.)
Jayneer Infrapower & Multiventures (P.) Ltd., 176 ITD 15 (Mum.)
Deemed gift not exempted u/s 47(iii)
M. Suseela, 125 ITD 253 (Visakhapatnam)
Gagan Infraenergy Ltd., 32 NYPTTJ 562(Del.) 13 Pradip N. Kapasi Chartered Accountant<br>
slide14. Slump sale – I(S.50B) Exchange on allotment of shares – amendment
Bharat Bijlee Ltd, 365 ITR 258 (Bom.)
Finance Act, 2021, w.e.f 01.04.2022
Non-compliant slump sales
B.V. Reddy, 222 Taxman 309 (Karn.)
Deed of conveyance for immovable property
Mahabaleswara Enterprises, 218 Taxman 287 (Karn.)
Negative Networth
Zuari Industries Ltd., 108 TTJ 140 (Mum.)
Summit Securities Ltd, 135 ITD 99 (SB) (Mum.)
Payment for non-compete agreement
Sangeeta Wig, 221 Taxman 159 (Mag.)(Delhi) 14 Pradip N. Kapasi Chartered Accountant<br>
slide15. Slump sale-II Sale to holding or subsidiary company
Section 47(iv) and (v)
Transfer of depreciable asset and section 50
Akzo Noble India Ltd., 440 ITR 185 (Cal.)
Amalgamation and Slump sale
Investment Trust of India Ltd., 211 TTJ 777 (Chennai)
Networth, STCL
PVR Ltd., 211 TTJ 132 (Hyd.) 15 Pradip N. Kapasi Chartered Accountant<br>
slide16. Slump sale-III Period of holding of unit – Anamoly
Equinox Solution (P.) Ltd., 393 ITR 566 (SC)
Item wise valuations
Vatsala Shenoy, 391 ITR 363 (SC)
Transfer under an order of Court
itatonline.org
COA for successor
Dharampal, 380 ITR 527 (Delhi) 16 Pradip N. Kapasi Chartered Accountant<br>
slide17. Amalgamation -I(S.2(1B), 47(vi) & (vii)) Date of Amalgamation- Marshall & Sons, 223 ITR 809(SC)
Effective date & Appointed date
Consolidated Accounts
Revised Audit Reports & TAR
GN ,AS and Ind AS
Inter se transactions - cancellation
MAT & MAT credit
Tax Credit
75% of All types of shareholders & allotment of types of shares
Cross holdings and cancellations, 244 ITR 631(Del.)
Subsequent changes in shareholdings
Block assessments 17 Pradip N. Kapasi Chartered Accountant<br>
slide18. Amalgamation -II Receipt of consideration partly in cash
Gautam Sarabhai Trust, 173 ITR 216 (Guj.)
M.C.T.M. Corpn.,231 ITR 524( Mad.)
Composite considerations and consequences
Partial exemption, computation of capital gains & COA of shares
Stock-in-trade
Royal Ind. 14 TC 22
Ramkumar Agarwal, 205 ITR 251(SC)
Excess treated as business income
Spencer & Co., 137 ITD 141 (TM)(Chd.)
Application of s.28(iv)
Deduction for expense interest post amalgamation/demerger
Aamby Valley Ltd., 198 TTJ 662 (Delhi) 18 Pradip N. Kapasi Chartered Accountant<br>
slide19. Amalgamation -III S.47(vi) v. 56(2)(via)
Vertex Project LLP, 105 ITR (T) 105(Hyd.)
Payment of interest
Ofisade (P) Ltd.,  29 TTJ (Ahd.) 80
Goodwill & Depreciation
Smiffs Securities Ltd.(SC),
Amendment of 2022
Position in hands of Amalgamated company
Bad debts,155 ITR 152 (SC)
Chapter VI-A deductions, cir. No. 15/563-IT(A-1) dt. 13.12.1983
Expenses of amalgamation, 219 ITR 639
Section 35 DD for spread over 5 years
Write backs & s.41(1)
Notice and assessments – s.170A
Mahagun Realtors Ltd, 443 ITR 194 (SC)
Maruti Suzuki India Ltd, 416 ITR 613 (SC) 19 Pradip N. Kapasi Chartered Accountant<br>
slide20. Demerger(S.2(19AA), 47(vib), (vic) & (vid)) Business , Unit & Undertaking
Transfer at Book value
Issue of 25% shares to Demerged company
Continued holding of undertaking & assets – no LIP
No deemed dividend; Explanation V, s.2(22)( e)
COA of shares of Resulting company
Net book value of assets tfd. / Net worth of company
C/f of Direct and Proportionate depreciation &losses
Demerger v. Slump sale
Avaya Global Connect Ltd., 122 TTJ 300( Mum.)
S.2(22)(a) not applicable
Grasim Industries Ltd., 222 TTJ 40(Mum.) 20 Pradip N. Kapasi Chartered Accountant<br>
slide21. Company to LLP – I(S.47(xiiib), 47A) Non-compliant conversion
Celerity Power LLP, 197 TTJ 45 (Mum.)
Tenancy rights
General Radio &Appliances, 60 CC 1013(SC)
Loan to partners of LLP – clause (c )
Aravali Polymers LLP, 65 SOT 11 (Kol.) 21 Pradip N. Kapasi Chartered Accountant<br>
slide22. Company to LLP – II Consideration to shareholders, only – cl(c)
Capital contribution in LLP
Share in profits of LLP
Nature of prohibition under cl(c)
One time (?) all time (?) 5 years(?)
Related to conversion or independent
Flowing from agreement or not
For services to LLP
To partners and not shareholders
Remuneration and interest to partners of LLP 22 Pradip N. Kapasi Chartered Accountant<br>
slide23. Company to LLP – III Revaluation before conversion – ‘a benefit’
K. T. C. Automobile P. Ltd. 62 SOT 59 (Cochin)
Alfa Inter-chem 20 ITR (T) 103 (Ahd)
Joe Marcelinho Mathias 156 TTJ 777 (Panaji)
Nayan L. Mepani 156 TTJ 768 (Mum)
Transfer of reserves – ‘a perquisite’
Kyal Developers P. Ltd. 63 SOT 93 (Chennai) 23 Pradip N. Kapasi Chartered Accountant<br>
slide24. Company to LLP – IV Shareholders to share at least 50% or more – cl. (d)
Period of 5 years
Profits - need not be losses
Amongst erstwhile shareholders as a group
100% at the time of conversion
Subsequent changes in constitution
No exception for death, insolvency, gift, etc.
Transfer of interest, only, in LLP
Continuity for 5 years in-built 24 Pradip N. Kapasi Chartered Accountant<br>
slide25. Company to LLP – V Annual sales, turnover, gross receipts < Rs. 60 lakhs - cl. (e)
Each of the 3 preceding previous years
Sales, etc. of ‘business’ – Cir. No. 1 dt. 06.04.2011
Not average sales
Year of conversion not included
Cases of incorporation within 3 years 25 Pradip N. Kapasi Chartered Accountant<br>
slide26. Company to LLP – VI Prohibition on payment out of accumulated profits – cl. (ea)
Standing in the accounts of company
Restriction for a period of 3 years
Direct or indirect payment
Negative balance of partners
Withdrawal of partners
Losses of LLP > Capital contribution
Accumulated profits not defined
Capital and revenue reserves
Statutory and voluntary reserves
Share Premium Account
Bonus shares before conversion 26 Pradip N. Kapasi Chartered Accountant<br>
slide27. Company to LLP – VII Value of asset – cl. (g)
Book value or fair value
Stock-in-trade, Investment & other assets 27 Pradip N. Kapasi Chartered Accountant<br>
slide28. Chapter XXI of Companies Act, 2013 - I Sections 366 to 374 of the Act (part 1)
Partnership firm, LLP, society, any business entity
Formed under any other law
Similar to part IX of Companies Act, 1956
Registration & Stamp duty
Rama Sundari Ray, 2 Cal 1
Vali Pattabhi Rao, 60 CC 568 (AP)
L.K.S Gold House Pvt Ltd., (2004) CC 896 (Mad.) 28 Pradip N. Kapasi Chartered Accountant<br>
slide29. Chapter XXI of Companies Act, 2013-II S.45 of IT Act
Texspin, 263 ITR 345 (Bom.)
Unity Care, 103 ITD 53 (Bang)
Baroda Refrigeration, 10 DTR (Ahd.) 4
Well pack 78 TTJ (Ahd.) 448
Rita mechanical works, 344 ITR 544 (P&H)
S.45(4) and 9B
Sachdeva and Sons, 4 SOT 413 (Asr.)
Krishna Electrical, 4 SOT 143 (Delhi)
Lincoln Pharma, 5 SOT 599 (Ahd.)
Texspin, (supra)
R.L. Kalathia & Co., 381 ITR 180 (Guj.)
CADD Centre, 383 ITR 258 (Mad.) 29 Pradip N. Kapasi Chartered Accountant<br>
slide30. Chapter XXI of Companies Act, 2013-III Implication of revaluation before conversion
Few relevant aspects
PAN, TAN, ROI, Depreciation, Loses
POH, COA, Bad debt, S.43B, S.10AA, Ch. VI-A
Amin Machinery P Ltd. 114 ITD 413 (Ahd.)
Well pack , (supra)
Possibility of claiming exemption u/s 47(xiii) 30 Pradip N. Kapasi Chartered Accountant<br>
slide31. Firm and Proprietary to Company - I(S.47 (xiii) & (xiv)) Manner of transfer
Itemised sale - business assignment - slump sale
Max India Ltd., 319 ITR 68
Premier Automobile Ltd., 182 CTR 202 (Bom.)
Non- compliant transfer
S.45, 48, 50, 50B, 72 and 32
Time for issue of shares
Prakash Electric Co., 407 ITR 340 (Karn.)
Sale of assets to company
Ana Labs, 371 ITR 295 (AP.)
Oriental Dyeing And Finishing Mills,175 TTJ 430 (Chandigarh) 31 Pradip N. Kapasi Chartered Accountant<br>
slide32. Firm and Proprietary to Company - II Succession of business
K.H. Chambers, 55 ITR 674 (SC)
Continuity of firm
Transfer of one business only to company
Need not be a new company
Stock-in-trade and itemised sale
Effect of Supreme Court decisions
A.L.A Firm, 189 ITR 285 (SC)
Sakthi Trading Co., 250 ITR 871 (SC)
Period of carry forward of losses 32 Pradip N. Kapasi Chartered Accountant<br>
slide33. Firm and Proprietary to Company – III Bank account continued
Revaluation before assignment
Nayan L Mepani, 49 SOT 641 (Mum.)
One of the businesses of proprietor
Vikram Vishwanath, 149 ITD 517(Bang.)
Date of allotment
Loan and Current Account
Minor partner
Negative balance 33 Pradip N. Kapasi Chartered Accountant<br>
slide34. Firm and Proprietary to Company - IV HUF partner
Working partner with disproportionate capital
Change in voting power within 50%
Issue of preference shares & Convertible preference shares
Continuous period
Stamp duty
PIB press release dated 05.08.1999
Circular No. 5/99 dated 19.05.1999
Veisting and transfer 34 Pradip N. Kapasi Chartered Accountant<br>
slide35. Firm to LLP ; Non-compliant - I Benefit of statutory exemption u/s. 47(xiiib) not possible
For company
For shareholders
Benefit of setoff of unabsorbed depreciation & losses u/s.72A(6A) not possible
No future taxation – immediate taxation, if any
Actual cost, WDV and cost of acquisition
Deeming fiction not to apply 35 Pradip N. Kapasi Chartered Accountant<br>
slide36. Firm to LLP;Non-compliant - II S. 54 and 55 of LLP Act and Schedule 2 of LLP Act
Assurances
FM’s speech & Memorandum Explaining Finance Bill, 2009
314 ITR 226 (St)
Circular No. 5 dated 03.06.2010
324 ITR 293 (St)
All partners of firm to be partners of LLP
All assets and liabilities of firm to be of LLP
Rights and obligations to be same
No transfer of assets and liabilities 36 Pradip N. Kapasi Chartered Accountant<br>
slide37. Firm to LLP ;Non-compliant - III No transfer on statutory vesting
Cases decided under part IX of Companies Act, 1956
Valli Patabhirama Rao v. Shri Ramanuja Ginning & Rice Factory (P) Ltd. 60 CC 568 (1986) (AP)
Ram Sundari Roy v. Syamendra Lal Roy 1 LR (1974) 2 (Cal)
L. K. G. Gold Homes P. Ltd. (2004) CC 896 (Mad)
Press Release dt. 05.08.1999 by CLB
Circular No. 5 dt. 19.05.1999 u/s. 565 of Companies Act
Companies Act v. LLP Act
‘Passed to and vest’ v.‘transferred to and shall vest’ 37 Pradip N. Kapasi Chartered Accountant<br>
slide38. Firm to LLP ;Non-compliant -IV Possible case for exemption from taxation
Statutory vesting by operation of law
No transfer to another person
Texspin Eng. & Mfg. Works 263 ITR 345 (Bom)
Well Pack Packaging 78 TTJ 448 (Ahd)
Unicore Fin. Luxembourg 323 ITR 25 (AAR)
Unique Care & Health 103 ITD 53 (Bang)
Same status of ‘firm’
Slump sale
Madan Mohan Chandak 47 SOT 207 (Chennai) 38 Pradip N. Kapasi Chartered Accountant<br>
slide39. Holding – Subsidiary – Holding(S.47(iv) & (v)) Lock-in-period of assets transferred
Sale of shares to subsidiary
Shahibaug Enterpirse, 320 ITR 695 (Guj.)
Whole of share capital
Anusandhan, 40 SOT 205 (Mum.)
Transfer to Step-down subsidiary
Emami Infrastructure, 91 taxmann.com 62 (Kol.)
Non-compliant transfer and loss
Kalindi Investment Ltd. 81 TTJ 196(Ahd.)
Transfer of Know-how
GSFC Ltd. 47 TTJ 279 (Ahd.)
MAT and TP
Mother Dairy Ltd., 141 TTJ 97 (Delhi)
Business income v. Capital gains
Navdeep Ind. P. Ltd., 49 TTJ 471 (Ahd.) 39 Pradip N. Kapasi Chartered Accountant<br>
slide40. Liquidation(S.46) S.46(i) and(ii) – a possible exit option
COA of asset received on distribution- s.55(2)(b)(iii) & 49(1)
Brahmi Investment (P.) Ltd., 286 ITR 66 (Guj.)
T.R. Srinivasan, 36 SOT 312 (Chennai)
Eligibility for reinvestment benefits
Ruby Trading Co. (P) Ltd., 259 ITR 54(Raj.)
Jaikrishan Vallabhdas, 231 ITR 108(Guj.)
Asset for s.46
Year of taxation
Distribution over years
S. 47 v. s.46 40 Pradip N. Kapasi Chartered Accountant<br>
slide41. Deemed dividend – I(S.2 (22)) Accumulated profits as per IT Act
Depreciation and WDV
Navnitlal C. Jhaveri, 80 ITR 582 (Bom.)
In hands of registered shareholders only
Namdhari Seeds Ltd , 224 Taxman 194 ( Karn.)
Receipt in family settlement
SKM Shree Shivkumar, 65 SOT 232 (Chennai)
Provisions for taxation duties
Vikram K Kothari, 218 Taxman 59 (Mag.)(All.)
Loan to Beneficiary of trust
Krupesh N Patel, 359 ITR 504 (Guj.)
Inter-corporate deposit
IFB Argo Industries, 42 taxmann.com 246(Kol.) 41 Pradip N. Kapasi Chartered Accountant<br>
slide42. Deemed dividend- II Flow of funds
Pravin Bhimshi Chheda, 228 Taxman 340 (Bom.)
Undisclosed income
Promod Dang, 105 TTJ 511 (Delhi)
Issue of bonus preference shares to equity shareholders
Briggs and Burton, 274 ITR 595 (AAR)
Receipt of subsidy
Rajasthan Wires (P.) Ltd, (2003) 1 SOT 648 (Jp)
Forfeiture of shares
Jaikisan Dadlani, 4 SOT 138( Mum.)
Debit balance of P&L Account
Ocsar Investment Ltd, 99 TTJ 1202 (Mum.) 42 Pradip N. Kapasi Chartered Accountant<br>
slide43. Deemed dividend- III Shareholding of individual and HUF
Kunal Organics (P) Ltd, 164 Taxman 169 (Ahd.)
Redemption of preference shares – S.2(22)(d)
Uday K. Pradhan , 9 NYPTTJ 1861 (Mum)
IT Park Ltd, 99 ITR (T) 633 (Bangalore)
Net amount to be deemed dividend
Sunil Kapoor 235 Taxman 279 (Madras)
Buy-back of shares – S.2(22)(d)
Goldman Sachs (India) Securities (P.) Ltd, 70 taxmann.com 46 (Mum)
NBFC
Sindhu Holdings, 46 ITR (T) 771 (Delhi)
More than one shareholder – proportionate
Puneet Bhagat, 157 ITD 353 (Delhi) 43 Pradip N. Kapasi Chartered Accountant<br>
slide44. Deemed dividend- IV Share premium
Shree Balaji Glass Manufacturing (P.) Ltd., 386 ITR 128 (Cal.)
Mahesh Chandra, 234 Taxman 158 (Cal.)
Indirect shareholder
Rajeev Chandrashekar, 239 Taxman 216 (Karn.)
Intermediate- subsidiary
Farida Holdings (P), 243 Taxman 428 (Mad.)
Current year’s profit
V. Damodaran, 2 Taxman 397(SC)
Exempt capital gains
Mahesh J. Sanzgiri, 1 Taxman 120(Bom.) 44 Pradip N. Kapasi Chartered Accountant<br>
slide45. Case Studies 45 Pradip N. Kapasi Chartered Accountant<br>
slide46. 46 Pradip N. Kapasi Chartered Accountant Case study- I; S.115 BAB Special incentive for specified manufacturing domestic companies
Rate of tax at 15% + SC and EC
Case of a company with two undertakings
Demerger of the company
Transfer of one undertaking to resulting company
Compliance of conditions of s.115BAB(2)
Benefit for a company set-up on or after 01.10.2019
Benefit not limited to new manufacturing unit
Not conditioned by split-up or reconstruction
Other conditions to be fulfilled<br>
slide47. Case Study – II; Firm to LLP Conversion under schedule II of LLP Act, 2008
Statutory vesting
Non-compliance of s.47(xiiib)
At book value or market value
Impact under Income Tax Act
Capital gains
Stock-in-trade
Unabsorbed business loss
Unabsorbed depreciation
Actual cost for LLP
Cost of acquisition for LLP
Celerity Power LLP, 197 TTJ (Mumbai) 45 47 Pradip N. Kapasi Chartered Accountant<br>
slide48. Case Study – III ; Company to LLP Company to LLP under schedule III of LLP Act, 2008
Domestic company with two units
Fixed assets at book value Rs. 2 cr + Rs. 4 cr = Rs. 6 cr
Investment assets at book value Rs. 1 cr ( fair value Rs. 10 cr )
Difficulty in compliance of clause (ea) of s.47 (xiiib)
Demerger & transfer of one unit to resulting company
Conversion of Demerged company into LLP
Effect and consequences 48 Pradip N. Kapasi Chartered Accountant<br>
slide49. Case Study – IV; Dividend Distribution Case of F.H.Co. with Subsidiary I.Co.
Share capital with substantial reserves
Investment in productive assets
Liable to payment of tax on distribution of dividend
Remittance of dividend and FEMA
Set-up of a new 100% subsidiary I.Co. II of F.H.Co.
Issue of shares at a premium
Merger of both I.Co.
Conversion of newly formed company into LLP
Withdrawal of funds by F.H.Co. 49 Pradip N. Kapasi Chartered Accountant<br>
slide50. Case Study – V; Merger of companies Holding company with two 100% CHC subsidiaries
One loss making company with negative net worth
Another profit-making company with good net worth
Merger of profit-making co. into loss making co.
Satisfaction of s.2(1B) and s.79 of IT Act
Impact of GAAR
Disregarding merger
Effect on losses
Future tax benefit whether a benefit ? 50 Pradip N. Kapasi Chartered Accountant<br>
slide51. Case Study – VI; Reduction of capital A company acquires shares of B company
Acquisition out of surplus
B company is a loss-making company
Reduction of capital by B company
Merger of A and B companies 51 Pradip N. Kapasi Chartered Accountant<br>
slide52. Case Study – VII; Transfer to F.Co. Transfer of assets by I.Sub.Co. to F.H.Co.
Transfer subjected to provisions of Transfer Pricing
S.92B(i) and S.92B(ii)
F.H.Co. sets up an LLP in India
Transfer at book value by I.Sub.Co. to I.LLP
Implications of s.92F(v) 52 Pradip N. Kapasi Chartered Accountant<br>
slide53. Case Study – VIII; Company to LLP Difficulties under clause (f) of s.47(xiiib)
Bonus to shareholders of company
Value of assets appearing in books of account of company
Book value or value of asset
R.L. Kalathia 381 ITR 180 (Guj.)
CADD Centre, 383 ITR 258 (Mad.) 53 Pradip N. Kapasi Chartered Accountant<br>
slide54. Thank You 54 Pradip N. Kapasi Chartered Accountant<br>