ABC Pvt. Ltd was converted into limited liability partnership (LLP) as ABC LLP on 1-10-2023. You are provided with the following particulars of ABC…

Tax treatment in the hands of ABC LLP on conversion of ABC Pvt. Ltd. into ABC LLP (i) Business loss of 54lakhs (relating to P.Y. 2019-20) As per section 72A(6A), the business loss of 54lakhs of ABC Pvt. Ltd. would be deemed to be the loss of ABC LLP for P.Y. 2023-24 and it would be able to set off and carry forward such loss. The carry forward is for 8 assessment years subsequent to the assessment year 2024-25. However, if subsequent to the conversion, ABC LLP fails to fulfill any of the conditions mentioned in section 47(xiiib), the set-off of business loss so made in any previous year would be deemed to be the income chargeable to tax in the year in which such conditions are not complied with. (ii) Depreciation and written down value of assets In case of conversion of ABC Pvt. Ltd. into ABC LLP, depreciation on assets shall be apportioned between the company and LLP in the ratio of the number of days for which the assets were used by them. Total Depreciation Plant and machinery (15%) = 14 lakhs x 15% = 2,10,000 Building (10%) = 40 lakhs x 10% = 4,00,000 In the hands of ABC LLP (for 183 days) Plant and machinery (15%) = 2,10,000 x 183/366 = 1,05,000 Building (10%) = 4,00,000 x 183/366 = 2,00,000 WDV in the hands of ABC LLP As per section 43 (6) , the actual cost of the block of assets in the hands of ABC LLP shall be the WDV of the block of assets as in the case of ABC Pvt. Ltd. on the date of conversion. WDV of P & M (15%) = 14 lakhs - 1,05,000 (₹ 2,10,000 x 183/366) = 12,95,000 WDV of Building (10%) = 40 lakhs - 2,00,000 (₹ 4,00,000 x 183/366) = 38,00,000 Actual cost of Plant and machinery on which deduction has been allowed or is allowable to the assessee under section 35AD would be 'NIL' in the hands of ABC Pvt. Ltd. and ABC LLP. (iii) Cost of land acquired in 2012 at 80 lakhs (Market value 120lakhs) The cost of acquisition of land in the hands of ABC LLP would be the cost for which ABC Pvt. Ltd. acquired it, i.e.,80 lakhs. (iv) Expenditure on voluntary retirement benefit of 28lakhs As per section 35DDA, in case of conversion of ABC Pvt. Ltd. into ABC LLP, deduction would be available to ABC LLP for the remaining periods from the previous year in which conversion took place. Since deduction of 5.6 lakhs each has been claimed by ABC Pvt Ltd. in P.Y. 2021-22 and P.Y. 2022-23, ABC LLP would be eligible for deduction of 5.6 lakhs each for the remaining three previous years, namely P.Y.2023-24, P.Y.2024-25 and P.Y.2025-26 under section 35DDA. (v) Unadjusted MAT credit u/s 115JAA of 8.6 lakhs As per section 115JAA (7) , in case of conversion of ABC Pvt. Ltd. into ABC LLP, the credit for MAT paid by ABC Pvt. Ltd. cannot be availed by the successor LLP i.e., ABC LLP. (vi) Unabsorbed depreciation of 48lakhs As per section 72A(6A), ABC LLP would be able to carry forward and set-off the unabsorbed depreciation of 48lakhs of ABC Pvt. Ltd. However, if subsequent to the conversion, ABC LLP fails to fulfill any of the conditions mentioned in section 47(xiiib), the set-off of depreciation so made in any previous year would be deemed to be the income chargeable to tax in the year in which such conditions are not complied with.