LLP Vikas Jain

7/28/2019 LLP Vikas Jain

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AN OVERVIEW ON LIMITED

Presentation at AHMEDABAD BRANCH OF ICAI

CA VIKASH JAIN

PARTNER RSPH & ASSOCIATES

on

E-mail : [email protected] :- +91-93277 15892

25th January, 2013

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LLP (history in Indian Legislative)

1957- Suggested by iron, steel & hardware merchant chambers-rejected by 7th Law commission

-

Industries 2003-Naresh Chandra Committee Report (Regulation of Private

Com anies and Partnershi s hi hli hted the rave need tointroduce LLPs in India

2005- JJ Irani Expert Committee on Company Law recommendedintroduction of LLPs

December 15, 2006: 2006 LLP Bill introduced in Parliament May 1, 2008: Union Cabinet gave its approval to introduction of a

new bill (2008 LLP Bill) replacing the 2006 LLP Bill

c o er , : n ro uce n ar amen January 7, 2009: Presidents assent given to the LLP Bill 2008 after

being passed in Loksabha and Rajyasabha

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, -


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AN INSIGHT IN TO LIMITED LIABILITY PARTNERSHIP ACT

a ure

of Company and flexibility of Partnership Separate Legal Entity- Continue its existence irrespective of

anges n par ners

LLP itself can enter into contracts and hold properties

Partners Liability limited to the agreed contribution

LLP concept exist in UK, US, Australia , Singapore & various gulf

countries (Indian LLP act based on UK LLP Act 2000 and

Singapore LLP Act, 2005)

Professional & Non-professional (Businessmen) , both can set up

LLP

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9 It is a written agreement between the partners of the limited

liability partnership and between the limited liabilitypartnership and its partners which determines the mutual

rights and duties of the partners and their rights and dutiesin relation to that limited liability partnership.

9 It is not necessary to enter into an LLP agreement as per LLP

Act,2008. In the absence of LLP agreement, the mutual rightsof partners & in relation to LLP will be determined as perschedule I of the LLP Act,2008.

9 Due to varied nature of different type of businesses, it maynot be practically advisable to have those standard clauses asmentioned in schedule 1. Therefore, it is advisable to have a

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legally drafted agreement


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LLP AGREEMENTLLP AGREEMENT

1.1. Parties (Individuals or body corporate sec. 5 LLP)Parties (Individuals or body corporate sec. 5 LLP)2.2. ObjectiveObjective3.3. Definition and interpretation ClauseDefinition and interpretation Clause

.. ommencemen o us ness oommencemen o us ness o

5.5. Duration of LLPDuration of LLP6.6. Designated Partners (LLP Act) Working partners (IT Act).Designated Partners (LLP Act) Working partners (IT Act).7.7. Role of Partners in Mana ementRole of Partners in Mana ement

(Otherwise any partner can take part in Management)(Otherwise any partner can take part in Management)8.8. Contribution of Partners (in cash or in kind).Contribution of Partners (in cash or in kind).

9.9. Partners powers, duties and authorities.Partners powers, duties and authorities.. ,. ,

(otherwise equally as per(otherwise equally as per SchSch 1.)1.)1111 Specify Remuneration to working partnersSpecify Remuneration to working partners

(otherwise no remuneration) [(See(otherwise no remuneration) [(See I.T.SecI.T.Sec. 40(b)]. 40(b)]

12.12. Define Interest to partners [Sec.40(b) of I.T. Act allowsDefine Interest to partners [Sec.40(b) of I.T. Act allows interestinterestup to 12% only]up to 12% only]

13.13. Power to expel (otherwise nobody can be expelled as per Schedule)Power to expel (otherwise nobody can be expelled as per Schedule)

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L L P vs. Other Business formsL L P vs. Other Business forms -- A Comparative analysisA Comparative analysis

S.S.

nono

ParticularsParticulars PartnershipPartnership CompanyCompany LLPLLP

1.1. GoverningGoverning Limited PartnershipLimited Partnership Companies AreCompanies Are Limited LiabilityLimited Liability

LawLaw Are governed by TheAre governed by The

Partnership Act,1932Partnership Act,1932

And various rulesAnd various rules

made there under.made there under.

governed by Thegoverned by The

Companies Act, 1956 .Companies Act, 1956 .

artners ps areartners ps are

governed by Thegoverned by TheLimited LiabilityLimited Liability

Partnership Act,2008Partnership Act,2008

and various rulesand various rules

made there under.made there under.

22 RegistrationRegist ration Registration isRegistration is Registration withRegistration with Registration withRegistration withROC is re uired.ROC is re uired...

3.3. CreationCreation It is Created byIt is Created by

ContractContract

It is Created byIt is Created by

LawLaw

It is Created by LawIt is Created by Law

4.4. DistinctDistinct

EntityEntity

It is not aIt is not a

separate legalseparate legal

EntityEntity

It is a separateIt is a separate

legal entity underlegal entity under

the Companiesthe Companies

Act 1956Act 1956

It is a separate legalIt is a separate legalentity under the LLPentity under the LLP

Act, 2008.Act, 2008.

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L L P vs. Other Business FormsL L P vs. Other Business Forms -- A Comparative AnalysisA Comparative Analysis

Sr.Sr. ParticularsParticulars PartnershipPartnership CompanyCompany LLPLLP

..

5.5. Choice of NameChoice of Name Any name as perAny name as per

choicechoice

Name to containName to contain

Limited in case ofLimited in case of

Name to containName to contain

Limited LiabilityLimited Liability

Private Limited inPrivate Limited incase of Privatecase of Private

Company as suff ix & isCompany as suff ix & is

as suffix & is subjectas suffix & is subjectto availabili ty.to availabili ty.

subject to availabili ty.subject to availabili ty.

66 Cost of Cost of

FormationFormation

Nominal cost ofNominal cost of

creating a partnershipcreating a partnershipfirm.firm.

Minimum fee forMinimum fee for

incorporation ofincorporation of

The cost of formationThe cost of formation

of LLP isof LLP is

Rs.6,000/Rs.6,000/-- approx. andapprox. and

for incorporation offor incorporation of

Public Company,Public Company,

than the cost ofthan the cost of

formation of Company.formation of Company.

Its statutory feesIts statutory fees

the minimum fee isthe minimum fee isRs.21000/Rs.21000/-- approx.approx.

ranges from Rs 500/ranges from Rs 500/to Rs 5,000/to Rs 5,000/--

7.7. PerpetualPerpetual It does not haveIt does not have It hasIt has It has perpetualIt has perpetual

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uccess onuccess on perpe ua success onperpe ua success on

as this depends uponas this depends upon

the will of partners .the will of partners .

perpe ua success onperpe ua success on

and the members mayand the members may

come and go.come and go.

partners may comepartners may come

and go .and go .


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S.S. ParticularsParticulars PartnershipPartnership CompanyCompany LLPLLPnono

8.8. Charter Charter

DocumentDocument

Partnership Deed is aPartnership Deed is a

charter of the firmcharter of the firm

which denotes itswhich denotes its

Memorandum andMemorandum and

Articles of AssociationArticles of Association

is the charter of theis the charter of the

LLP Agreement is aLLP Agreement is a

charter of the LLPcharter of the LLP

which denotes itswhich denotes its

scope of operationscope of operation

and rights and dutiesand rights and duties

of the partnersof the partners

company whichcompany which

defines its scope ofdefines its scope of

operation.operation.

scope of operationsscope of operations

And r ights and dutiesAnd r ights and duties

of the partners visof the partners vis--

99 CommonCommon

SealSeal

There is no conceptThere is no concept

of common seal inof common seal in

partnershippartnership

It denotes theIt denotes the

signature of thesignature of the

company and everycompany and every

It denotes theIt denotes the

signature and LLPsignature and LLP

may have its ownmay have its own

company s a ave scompany s a ave s

own common sealown common seal(Optional),(Optional),

dependant upon thedependant upon the

Terms of theTerms of the

10.10. Formalities of Formalities of

IncorporationIncorporation

In case ofIn case of

registration, Deedregistration, Deed

along with form /along with form /

Various eVarious e--forms alongforms along

the Memorandum &the Memorandum &

Articles of AssociationArticles of Association

are to be filed withare to be filed with

Various eVarious e-- forms areforms are

to be filed with Theto be filed with The

Registrar ofRegistrar of

Com anies withCom anies with

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affidavit required toaffidavit required to

be filed with ROFbe filed with ROF

along with requisitealong with requisitefiling feesfiling fees

The Registrar ofThe Registrar of

Companies withCompanies with

prescribed feesprescribed fees

prescribed feesprescribed fees


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11.11. Time required for Time required for

formationformation

It will take nominalIt will take nominal

time.time.

It will take 8It will take 8--10 days10 days

(approx.) to(approx.) to

incorporate (inclusiveincorporate (inclusive

It will take 8It will take 8--10 days10 days

(approx.) to(approx.) to

incorporate (inclusiveincorporate (inclusive

of time taken to obtainof time taken to obtain

DIN)DIN)

of time taken toof time taken to

Obtain DPIN)Obtain DPIN)

1212 LegalLegal Only registeredOnly registered A company is a legalA company is a legal A LLP is a legal enti tyA LLP is a legal enti ty

rocee ngsrocee ngs partners p can suepartners p can sue

third partythird party

ent ty w c can sueent ty w c can sue

and be suedand be sued

w c can sue an ew c can sue an e

suedsued

13.13. ForeignForeign

ParticipationParticipation

ForeignForeign NationalsNationals cancan

notnot bebe aa PartnerPartner inin aa

Foreign Nationals canForeign Nationals can

be a member in abe a member in a

Foreign Nationals canForeign Nationals can

be a Partner in a LLP.be a Partner in a LLP...

14.14. Number of Number of

MembersMembers

Minimum 2 andMinimum 2 and

Maximum 10 / 20Maximum 10 / 20

2 to 50 members in2 to 50 members in

case of Privatecase of Private

Company andCompany and

Minimum 2 partnersMinimum 2 partners

and there is no limitand there is no limit

for maximum numberfor maximum number

in case of Publ icin case of Publ ic

CompanyCompany

of partnersof partners

15.15. Ownership of Ownership of Partners have jointPartners have joint Company & not itsCompany & not its The LLP independentThe LLP independent

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assets belonging toassets belonging to

partnership firmpartnership firm

ownership of assetsownership of assets

ownership of assetsownership of assets


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20.20. Transfer of Transfer of

ShareShare

Not transferable.Not transferable. Ownership is easilyOwnership is easily

transferabletransferable

by way ofby way of

Regulations relatingRegulations relating

to transfer areto transfer are

governed by the LLPgoverned by the LLP

rans er o s ares.rans er o s ares. greemen .greemen .

2121 DissolutionDissolut ion By agreement, mutualBy agreement, mutual

consent, insolvency,consent, insolvency,

Voluntary or by orderVoluntary or by order

of National Companyof National Company

Voluntary or by orderVoluntary or by order

of National Companyof National Company

cer a n con ngenc es,cer a n con ngenc es,

and by court order.and by court order.

aw r unaaw r una aw r una .aw r una .

22.22. Admission asAdmission as

partner / memberpartner / member

A person can beA person can be

admitted as a partneradmitted as a partner

A person can becomeA person can become

member by buyingmember by buying

A person can beA person can be

admitted as a partneradmitted as a partner

AgreementAgreementshares of a company.shares of a company. as per the LLPas per the LLP

AgreementAgreement

23.23. Cessation asCessation as

partner / memberpartner / member

A person can cease toA person can cease to

be a artner bbe a artner b

A member /A member /

shareholder can ceaseshareholder can cease

A person can ceaseA person can cease

to be a artner as er to be a artner as er

resignationresignation

or due to death or asor due to death or as

per the agreementper the agreement

to be a member byto be a member byselling his shares.selling his shares.

the LLP Agreement orthe LLP Agreement or

in absence of thein absence of the

same by giving 30same by giving 30

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the LLPthe LLP


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S.S. ParticularsParticulars PartnershipPartnership CompanyCompany LLPLLP

nono

24.24. StatutoryStatutory

MeetingsMeetings

There is no provisionThere is no provision

with regard to holdingwith regard to holding

of any meeting.of any meeting.

Board Meetings andBoard Meetings and

General Meetings areGeneral Meetings are

required to berequired to be

There is no provisionThere is no provision

with regard to holdingwith regard to holding

Of any meeting.Of any meeting.con uc e acon uc e a

appropriate time .appropriate time .2525 AnnualAnnual

FilingFiling

No return is requiredNo return is required

to be filed withto be filed with

Annual FinancialAnnual Financial

Statement and AnnualStatement and Annual

Annual statement ofAnnual statement of

accounts andaccounts andeg s rar o rmseg s rar o rms

Return is required toReturn is required to

be filed with thebe filed with the

ROC every year.ROC every year.

Solvency (eForm 8) &Solvency (eForm 8) &

Annual Return (eformAnnual Return (eform

11) is required to be11) is required to befiled with ROC everfiled with ROC ever

year.year.

26.26. Audit of Audit of

AccountsAccounts

Partnership f irms arePartnership f irms are

only required to haveonly required to have

tax audit o f theirtax audit o f their

Companies areCompanies are

required to get theirrequired to get their

Al l LLPs except forAl l LLPs except for

those having turnoverthose having turnover

accounts as per theaccounts as per theprovisions of theprovisions of the

Income Tax Act.Income Tax Act.

annually as per theannually as per the

provisions of theprovisions of the

Companies Act, 1956Companies Act, 1956

..

or contribution Lessor contribution Less

than Rs.25 Lacs inthan Rs.25 Lacs in

any financial year areany financial year are

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required to get theirrequired to get their

accounts auditedaccounts audited

annually as per theannually as per the

Provisions of LLP ActProvisions of LLP Act


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S.S. ParticularsParticulars PartnershipPartnership CompanyCompany LLPLLP

nono

27.27. WhistleWhistle

BlowingBlowing

No such provis ion isNo such provis ion is

provided underprovided under

TheThe

No such provis ion isNo such provis ion is

provided under theprovided under the

Companies Act, 1956Companies Act, 1956

Provision has beenProvision has been

made to prov idemade to prov ide

protection toprotection toar ners p c ,ar ners p c ,

Employees & partnersEmployees & partners

providing usefulproviding useful

information during aninformation during an

convicting anyconvicting any

partner or firm.partner or firm.

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STEPS REQUIRED TO REGISTER LLP

All the LLP Forms are e-forms which requires digital signatures.

Hence

Partner/Designated partner of LLP/proposed LLP, whose signatures are to be

-

any authorized certifying agency.

. ,

Step 2

Obtain Directors Identification Number. (DIN)

As per rule 2(1)(v) DIN means Identification Number allotted by Central Govt. toan individual or a nominee of a body corporate who intends to be appointed DP

of LLP.

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Any individual intending to become DP should file online application For DIN

(Rule 10)


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Cont (Steps required to register LLP)

Applicant should attach certified copies of identity and address proofs,Affidavit along with form (scanned copy). In case of foreign national, a certified

copy of Passport should be enclosed.

DIN is valid for life time.

As per Rule 10(8) Every DP should intimate his consent to become DP to theLLP in form 9 (within 30 days of admission) and the LLP shall intimate the

.

Every LLP must have different name. Hence

tep 3 eservat on o ame orm u e

Form-1 for reservation of name shall be filed. Partners shall have to select

name of the ro osed LLP u to 6 choices can be indicated .

Any partner or designated partner in the proposed LLP may submit Form-1and will append his digital signature and submit the e-form.

Approval of name for Indian LLP is valid for 3 months (fees Rs.200/-).

-

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. ,+ Rule 18(3)

An existing entity can object allotment of name (Form 23).


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Step 4 (Steps required to register LLP)

Form 2 Incor oration: Document + StatementsAfter the name is reserved by the Registrar,

Incorporation Document and Statement (Form 2)

shall be filled up and filed electronically.

Part A of Form 2 contains following particulars :(a) Name of LLP

b Re . office address

(c) Details of Partners

(d) Value and mode of contribution

(e) Proposed business, etc.

Part B of Form 2 contains a statement to be signed by a DP and a Professional

engaged by LLP.

-

named in the incorporation document as a designated partner having DPIN.

Also a statement to be digitally signed by an advocate/company secretary/

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chartered accountant/ cost accountant in practice who is engaged in the

formation of LLP.


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Congratulations! Your LLP is now registered by ROC

ep xecu e greemen ampAnd file Form 3 which is summary of LLP Agreement. As per Rule 21

Form 3 should be filed along with the prescribed fee within 30 days of the date

of Incorporation. (Rule 21).

Forms List

Description E-Forms

Application for reservation or change of name Form1

Incorporation Document and Statement to Incorporation Document and

Subscriber's Statement Form2

Information with regard to Limited Liability Partnership Agreement and

changes, if any, made there in Form3

Notice of a ointment, cessation, chan e in name address desi nation of

a partner / designated partner, intimation of DPIN and consent to become apartner/designated partner. Form4

Notice for change of name Form5

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pp cat on or a otment o es gnate artner ent cat on um er ow

Statement of Account & Solvency Form8

Intimation of changes in particulars by Designated Partners Form 10


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Annual Return of Limited Liability Partnership Form11

Form for intimating other address for service of documents Form12

Notice of change of place of registered office Form15

Application and statement for the conversion of a firm into Limited Liability

Application and Statement for conversion of a private company/unlisted publiccompany into limited liability partnership. Form18

Notice of intimation of Order of Court Tribunal CLB Central Government to the

Registrar Form22

Application for direction to LLP to change its name Form23

Application to the Registrar for striking off name Form24

Application for reservation/renewal of name by a foreign LLP/foreign company Form25

Form for registration of particulars by foreign limited liability partnership Form27

era on n e - e ncorpora on ocumen , or o er ns rumen cons u ng

or defining the constitution of a limited liability partnership incorporated or

registered outside India; or (B) The registered or principal office of a limited liabili Form28

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era on n e cer ca e o ncorpora on or reg s ra on o m e a y

partnership incorporated or registered outside India (B) Alteration in the name or

address of any of the persons authorized to accept service on behalf of a foreign l Form29Application for compounding of an offence under the Act Form31


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Statements of Accounts and Solvency & AuditStatements of Accounts and Solvency & Audit ((Sec.34)Sec.34)

by Rule 24. (Sec.34).by Rule 24. (Sec.34).

(ii)(ii) Accounts on cash basis or on accrual basis under double entry system ofAccounts on cash basis or on accrual basis under double entry system ofaccountin .accountin .

(iii) Accounts shall be audited by Auditors appointed by the LLP, in accordance(iii) Accounts shall be audited by Auditors appointed by the LLP, in accordancewith Rule 24.with Rule 24.

Audit compulsory under LLP Act if :Audit compulsory under LLP Act if : --

(a) If turnover exceeds Rs. 40(a) If turnover exceeds Rs. 40 lakhslakhs in any F.Y.in any F.Y.

(b) Contribution by partners exceed Rs. 25(b) Contribution by partners exceed Rs. 25 lakhslakhs..

iv Within a eriod of six months from the end of the ear LLP to re are aiv Within a eriod of six months from the end of the ear LLP to re are aStatement of A/Statement of A/cscs and Solvency in Form No.8 as prescribed by Rule 24.and Solvency in Form No.8 as prescribed by Rule 24.It is to be signed by the Designated Partner.It is to be signed by the Designated Partner.

(v) Before 30th October in each year, the Statement of Accounts and Solvency(v) Before 30th October in each year, the Statement of Accounts and Solvency

or e year en e on s arc s requ re o e e w e eg s raror e year en e on s arc s requ re o e e w e eg s rar( Rule 24)( Rule 24)

(vi) (Sec. 35) Annual Return(vi) (Sec. 35) Annual Return Every LLP to file Annual Return within 60Every LLP to file Annual Return within 60 days ofdays of--

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. . ,. . ,Rs. 100,000/Rs. 100,000/--) Else additional fee of Rs 100/) Else additional fee of Rs 100/-- per day.per day.


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CONVERSION TO LLPCONVERSION TO LLP (Sec.55 to 57)(Sec.55 to 57)

..

(Section 55 + Schedule(Section 55 + Schedule--II).II).

.. partners of LLP.partners of LLP.

2.2. A private company can be converted into LLP only if :A private company can be converted into LLP only if :

--

-- there is no security interest subsisting like mortgagethere is no security interest subsisting like mortgage

(Sec. 56 Schedule(Sec. 56 Schedule--III)III)

.. ..

IV)IV)

4.4. Registrar to issue a certificate in Form No. 19.Registrar to issue a certificate in Form No. 19.

5.5. On Re istration of LLP erstwhile firm or com an will be deemed to beOn Re istration of LLP erstwhile firm or com an will be deemed to be

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dissolved.dissolved.


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((ContContCONVERSION)CONVERSION)

a)a) On incorporation of LLP all the rights and liabilities under various agreementsOn incorporation of LLP all the rights and liabilities under various agreementsexecuted by the firm shall stand assigned to LLP as if those agreements wereexecuted by the firm shall stand assigned to LLP as if those agreements wereexecu e y ns ea o e rm.execu e y ns ea o e rm.

b)b) All the properties of previous firm would vest in LLP without any assurance.All the properties of previous firm would vest in LLP without any assurance.

c)c) If any property of the partnership firm is registered with any authority, LLPIf any property of the partnership firm is registered with any authority, LLPmust notify the authorities like SSI etc., about the conversion and submit themust notify the authorities like SSI etc., about the conversion and submit theparticulars in such form as the authority may specify.particulars in such form as the authority may specify.

d)d) For a period of 12 months LLP will have to mention its previous Name andFor a period of 12 months LLP will have to mention its previous Name andRegistration number and business Form.Registration number and business Form.

If the Registrar refuses registration, the Applicant may apply to the TribunalIf the Registrar refuses registration, the Applicant may apply to the Tribunal

w n ays rom suc n ma on o re usa u e .w n ays rom suc n ma on o re usa u e .

Rule 33 provides that upon such conversion the necessary intimation to theRule 33 provides that upon such conversion the necessary intimation to theRegistrar of Firms or Registrar of Companies, as the case may be shall beRegistrar of Firms or Registrar of Companies, as the case may be shall be

21

. .. .


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LLP & TAXATIONLLP & TAXATION

1.1. World wide LLP taxation practice.World wide LLP taxation practice.

a)a) Tax Transparent (Pass through).Tax Transparent (Pass through).

In U.K. and Singapore, Tax is not payable by LLP.In U.K. and Singapore, Tax is not payable by LLP.

bb Tax o a ue uridical entit .Tax o a ue uridical entit .

In Belgium and Australia, LLP is taxable entity.In Belgium and Australia, LLP is taxable entity.

c)c) FlexibleFlexible

In USAIn USA Left to the decision of the partners.Left to the decision of the partners.

2.2. Sec.2(23) of I.T. Act amended to treat LLP as a firm.Sec.2(23) of I.T. Act amended to treat LLP as a firm.

3.3. In India LLP is tax opaque juridical entityIn India LLP is tax opaque juridical entity -- Tax payable by LLP.Tax payable by LLP.

4. LLP registered in India will be a resident even if only a part of control and management is4. LLP registered in India will be a resident even if only a part of control and management isin Indiain India

5. No surcharge, effective tax rate 30.9%5. No surcharge, effective tax rate 30.9%

6.6. No MAT (Minimum Alternate Tax) A company has to payNo MAT (Minimum Alternate Tax) A company has to pay [email protected]%[email protected]% ((eff.rateeff.rate 20.007%20.007%of Book Profit (Sec.115JB) However LLP HAS TO PAY AMT @ 18.5%of Book Profit (Sec.115JB) However LLP HAS TO PAY AMT @ 18.5% eff.rateeff.rate 19.055%19.055%

7. No DDT (Dividend Distribution Tax7. No DDT (Dividend Distribution Tax Sec.115 O)Sec.115 O)

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8. Profits distributed by LLP exempt in the hands of the partners Sec.10(2A).8. Profits distributed by LLP exempt in the hands of the partners Sec.10(2A).


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9. Profit earned by the Assignee of economic Interest (as per Sec.42 of LLP Act)9. Profit earned by the Assignee of economic Interest (as per Sec.42 of LLP Act)is taxable in his hands.is taxable in his hands.

..

If a private limited company gives any loan to any shareholder holding not less than 10%If a private limited company gives any loan to any shareholder holding not less than 10%of share then that loan is taxed as dividend received from the company. [Sec.2(22)(e) ofof share then that loan is taxed as dividend received from the company. [Sec.2(22)(e) ofI.T.Act]I.T.Act]

11.11. Corporate law provisions for interCorporate law provisions for inter--corporate deposits will not apply. (Sec.58corporate deposits will not apply. (Sec.58--A ofA ofCompanies Act.Companies Act. LLP is free to receive deposits from other LLPs. A company can inviteLLP is free to receive deposits from other LLPs. A company can invitedeposits from public as perdeposits from public as per rules only).rules only).

12.12. Interest paid to partnersInterest paid to partners is allowableis allowable--deduction provided capped at 12%deduction provided capped at 12%[Sec.36(1)(iii),Sec.40(b),Sec.184].[Sec.36(1)(iii),Sec.40(b),Sec.184].

As per Sec.36(1)(iii) the interest paid on the capital borrowed for the purpose of businessAs per Sec.36(1)(iii) the interest paid on the capital borrowed for the purpose of businessis allowed as deduction. However as per Sec.40(b)(v) interest paid to partners if notis allowed as deduction. However as per Sec.40(b)(v) interest paid to partners if notspecified in the Partnership Deed is not allowed.specified in the Partnership Deed is not allowed.

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Moreover, interest is allowed only to the extent of 12%.Moreover, interest is allowed only to the extent of 12%.


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.. ..instrument of partnership (P. Deed or LLP Agreement) and the shares of partnersinstrument of partnership (P. Deed or LLP Agreement) and the shares of partnersare specified therein. In case of unwritten partnership the deductions for salary andare specified therein. In case of unwritten partnership the deductions for salary andinterest are not allowed. The provisions will equally apply to LLP.interest are not allowed. The provisions will equally apply to LLP.

14. Remuneration to working partners allowed subject to cap.u/s.40(b)(v)14. Remuneration to working partners allowed subject to cap.u/s.40(b)(v)--if paid inif paid in

accordance with Deed/Agreement.accordance with Deed/Agreement.(a) On the first 3 lacs of book profit or in the case of loss Rs.1,50,000/(a) On the first 3 lacs of book profit or in the case of loss Rs.1,50,000/-- or 90% of Book profit.or 90% of Book profit.

(b) On the balance profit in excess of 3 lacs(b) On the balance profit in excess of 3 lacs @ 60% of book profit.@ 60% of book profit.

15.15. Retiring/deceased partners share in loss cannot be carried forward in the hands ofRetiring/deceased partners share in loss cannot be carried forward in the hands ofLLPLLP Sec.78(1)Sec.78(1)--There is a contrary view also.There is a contrary view also.

16.16. ore gn s s a e axe as compan esore gn s s a e axe as compan es un er e . . c an no as a rms .un er e . . c an no as a rms .

17.17. Wealth Tax not applicable to LLPs.Wealth Tax not applicable to LLPs.But interest of the partner in the assets of the firm may be liable to wealth TaxBut interest of the partner in the assets of the firm may be liable to wealth Tax

. . .. . .

The issue is debatable. Since LLP is not equated with firm under W.T. Act, the provisionThe issue is debatable. Since LLP is not equated with firm under W.T. Act, the provisionmay not have applicability in the case of partners of LLP.may not have applicability in the case of partners of LLP.

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THANK YOUTHANK YOUCA VIKASH JAINCA VIKASH JAIN

B.com (B.com (HonsHons.) F.C.A., DISA.) F.C.A., DISA

--Opp. Orient Club,Opp. Orient Club,

Near Gu arat Colle eNear Gu arat Colle e

Ellis bridge,Ellis bridge, AhmedabadAhmedabad..Phone : 079Phone : 079--32403451; 2640135132403451; 26401351

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