Articals that are worth reading

Shares of unlisted company to be treated as long term capital asset if helf for 24 months or more before transfer

23 Jul,2018

Section 2 (42A) provides that short term capital asset means a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer.

It is provided that in the case of a security ( other than a unit) listed in a recognised stock exchange in indiaor a unit of the unit trust of india established under the Unit Trust of India Act, 1963 or a unit of an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words " thirty Six Months" the words " twelve months" had been substituted. 

The Finance Act, 2016 has inserted a third proviso to section 2 (42A) from the assessment year 2017-18 so as to provide that in the case of a share of a compnay ( not being share listed in a recognised stock exchange in India), the provisions of section 2 ( 42A) shall have effect as if for the workds " thirty Six Months"  the words " Twety Four Months " had been substituted.

Equalization levy on Digital Advertising Charges paid outside India with effect from June 1 2016

23 Jul,2018

The advertisement charges for advertising on google, facebook, Linkedin and other digital advertising platform are usually paid out of india in foreign currency, though entire advertising activity happens in india, and escapes any taxation in India.

The Indian Finance Minister Sri Arun Jaitly has introduced the equalization levy with effect from june 1, 2016. The provision for equalization are provided in Chapter VIII of the Finance Act 2016.

Brief summary of Provisions are as follows :

Rate of tax and Services Covered :

 The equalization levy would apply @ 6% on amount paid or payable  for Online advertisement, any provision for digital advertising space or any facility service for the purpose of online advertisement or any other service as may be notified later by government. Levy is applicable on amount paid or payable for above services to non-resident.

The scope of the levy may be expanded to cover a wider range of digital goods and services as time progresses.

Equalization levy is aimed at taxing business-to-business (B2B) e-commerce transactions. Levy is not applicable  where payment is  not for the purposes of carrying out business or profession.

Levy is not applicable if aggregate of payment to a non resident during the financial year does not exceed Rs 1 lakh.

Collection and deposit and filing of return :

The said tax of 6% is required to be deducted from the amount paid or payable to non-resident for specified services.

Tax so deducted is required to deposited on a monthly basis within 7th of following month. Interest at the rate of 1 % per month or part of month is applicable for delayed deposit of taxes.

Annual statement with respect to levy is required to filed with specified period form end financial year in which service are provided. To rectify any mistake or omission in the statement filed revised statement can be filed within 2 years from end of financial year in which service is provided. Statement will be processed and intimation for any demand or refund will be sent with in end of 1 year from the end of financial year in which statement is filed. Any mistake in such intimation can be rectified within one year from the end of financial year in which intimation was issued.

Penalty :

Non deduction of equalization of levy would attract penalty equal to amount of equalization levy in addition to payment of equalization levy and interest on delayed payment.

Where Equalization Levy is deducted but not deposited with government would attract penalty of Rs 1,000 per every day during which such failure continues. This penalty is subject to maximum limit of equal to amount of equalization levy.

Non filing of annual statement would attract penalty of Rs 100 for each day during which the failure continues.

No penalty shall be imposed where assessee proves to the satisfaction of the Assessing Officer that there was reasonable cause for the said failure.

Chapter provides for appeal to Commissioner ( appeals) and to Income Tax Tribunal against order levying penalty.

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Conversion of Private Limited Company to LLP

23 Jul,2018

Limited Liability Partnership Act- 2008 gave a new and easy way to run a business with less of compliance which also reduces compliance cost and provides tax benefits etc. LLP helped small business/ new entrepreneurs to run their business in easy and cost effective way. Let’s have an overview of comparison between Private Limited Company and LLP.

LLP is governed by Limited Liability Partnership Act- 2008 which came in to force on 1st day of April 2008. This Act was introduced with the idea of promoting MSME Sector (Micro Small Medium Enterprise) with the advantage of self-governance and less compliance.

LLP is an alternate corporate body, comprising the benefit of both Company and Partnership.

  • It contains the benefit of Limited liability to partner and Flexibility of Partnership.
  • LLP is a corporate body and granted the legal status same as that of company.
  • Unlike the partnership in LLP the liability of the partner is limited up to the contribution made by them.

A registered limited company in India (Private or Public) has a lot of complex formalities and incurs additional overheads for managing affairs including mandatory board meeting, maintenance of statutory records, filling of e-forms with MCA etc. Absence of such mandates for LLP combined with advantages such as non-applicability of dividend distribution tax on profit repatriation, transfer of profit rules and deemed dividend profit issues, MAT provisions.

In India, formation, registration, and regulation of an LLP is exclusively governed and controlled by the rules, provisions, and regulations provided in the LLP Act of 2008 and the LLP Rules of 2009. The Ministry of Corporate Affairs (MCA), Government of India, and its well-equipped web portal [] is directly concerned for establishing an LLP.

The comparative chart of compliances to be made by a company and LLP is given below:



Private Company

Maintenance of Statutory Records

No statutory registers are required to be maintain by LLP

As per Companies Act,2013 many statutory registers are required to be maintained eg. Register of Members etc.

Convening of Meetings

No such requirement

Require to hold Meetings as per Section- 173. (At least Two Board Meeting and one Annual General Meeting for Small Company and At least four Board Meeting and One Annual General Meeting for other than Small company).

Addition & deletion of Directors

Require to amend LLP Agreement and File E-form- 3 & E-form-4.

Require to Pass Resolution in General Meeting, File e-form-DIR-12 and require many documents from the person who is appointed as Director. (As per Section-152 of Companies Act, 2013.)

Increase in Capital

Only require to amend LLP Agreement and File e-form Form-3.

Require to Pass Ordinary resolution in General Meeting and file form SH-7.

Annually form filling requirement

Only Two annual E-form- 8,


There are much formsE-form-AOC-4

E-form- MGT-7, E-form- MGT-14


Loans & borrowings

As per LLP Agreement

There is Cap for Loans and Borrowings as per section 179 & 180, Require to hold Board Meeting and file form with ROC.

Related Party Transactions

No restrictions

Transaction to be at arm’s length price only and as per provisions of Secton-188 of Companies Act-2013.

Audit of Accounts

Require only if turnover above 40 lacs or Contribution more than 25 lacs.

Audit is Compulsory.


Benefits of LLP as compared to Corporates



Private Company


Minimum 2 Partners

Minimum Member-2, Maximum Member- 200

Easy to Form, Run and manage

No Minimum Capital requirement for Incorporation

Minimum Capital for Incorporation of Private Limited Company is Rs. 1,00,000/- and for Public Limited Company is Rs. 5,00,000/-.

Management through

LLP Agreement

MOA and AOA of the Company


Benefits under Income Tax Law

  • Saving of Dividend Distribution Tax. (There is no provision of Dividend Distribution Tax in LLP)
  • Saving of MAT Tax. (Because LLP don’t give credit of MAT)
  • Saving of Income Tax due to Interest and remuneration payable to partners as salary payable to directors.

Procedure to convert a Company into LLP.

  • Obtain DIN(Director Identification No) & DSC (Digital Signature)

Designated Partners of LLP must have their DIN and DSC.

  • Board Meeting
  • Call meeting of board of Director.
  • Pass Resolution for Conversion of Company into LLP.
  • Pass Resolution to authorize any director to Apply for Name of LLP.


  • Application for Name availability

Any private company or unlisted public company can be converted into LLP. However, in this case LLP shall take same name as that of the company at the time of conversion.

  • File LLP E-Form-1 with ROC

Attachments: Board Resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form

  • Obtaining Name approval Certificate


  • Filing of Incorporation documents

File LLP Form-2


  • Proof of Address of Registered office of LLP.
  • Subscription sheet signed by the promoters along with the consent of partners.
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner
  • Drafting of LPP Agreement

LLP agreement has to be drafted line with LLP Act. It is not mandatory to file LLP agreement at the time of registration and same can be file within 30 days from the date of incorporation. Designated partners are responsible for doing all acts, matters and things that are required to be done for complying with the provisions of the LLP act. They are liable to all penalties imposed on the LLP. So it is very important to draft LLP agreement with professional help.

  • Filing of application for Conversion

File LLP E-Form-18 with the ROC


  • Statement of shareholders.
  • Incorporation Documents & Subscribers Statements in Form 2 filed electronically.
  •  Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.
  • List of all the Secured creditors along with their consent to the conversion.
  • Approval of the governing council (In case of professional private limited companies)
  • NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.
  • Approval from any other body/authority as may be required.
  • Particulars of pending proceedings from any court/Tribunal etc.


  • REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in Form19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.


  • Filing of LLP E- Form -3

Attachment: LLP Agreement

  • Filing of E-Form 14 (Intimation to Roc)

As per notification dated 15th October, 2015 issued by Ministry, Form-14 is not required to be filed in case of conversion of private company/unlisted public company into LLP.


  • Copy of Certificate of Incorporation of LLP formed.
  • Copy of incorporation document submitted in Form 2


  1. Conversion of a Private Company to LLP is comparatively beneficial in terms cost, benefit and compliance.The conversion from the existing corporate structure can be made to a LLP while retaining the advantages of Limited Liability and less compliances.LLP may be more suitable for small entrepreneur and professionals particularly. 

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