Photo of Bipluv Jhingan

Associate in the Tax Practice at the Mumbai office of Cyril Amarchand Mangaldas. Bipluv specialises in various aspects of direct tax such as corporate tax, restructuring, and funds. He can be reached at bipluv.jhingan@cyrilshroff.com

Indian Supreme Court Rectifies Mistake and Grants Benefit of Tax

To attract investment, industrial activities and improve economic development ,in certain states such as Himachal Pradesh, Uttaranchal, Sikkim and the states in the North-East, the Central Government has introduced a time-bound tax holiday, deducting 100% profit for the first five years and 25% of profits in subsequent five years under section 80-IC of the Income-tax Act, 1961 (IT Act).

This tax holiday is available to enterprises that have set up new units or carried out substantial expansion of existing units within a specified period (different dates apply for different states and regions). The conditions for availing the holiday are that the unit should operate or commence production, or manufacture specified articles, in these special category states.
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Conversion of Company into LLP - Income Tax Act

The business form of Limited Liability Partnership (LLP) became available in India when the Limited Liability Partnership Act, 2008 (LLP Act) was enacted. Prior to this, businesses were organised as companies under the Companies Act. Small businesses find LLP to be a preferred form and since the LLP Act has a provision for conversion of a company into an LLP, many companies sought to convert to LLP. However, the question was whether such conversion would attract taxation under the Income Tax Act, 1961 (IT Act).
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The Telangana and Andhra Pradesh High Court (High Court) in the case of Leo Edibles and Fats Limited v. TRO, Writ Petition No 8560 of 2018, has allowed the liquidation of assets of a company under the Insolvency and Bankruptcy Code, 2016 (IBC), despite the claim of the tax authorities that they have a charge over it, by virtue of having initiated attachment proceedings under the Income Tax Act, 1961 (IT Act). The High Court, while dealing with the interplay between the IT Act and the IBC, held that the income tax authorities are not at par with ‘secured creditors’ under the IBC.

The petitioner in the instant case had purchased certain property of a company undergoing liquidation under the IBC in an e-auction. The registrar refused to register the transfer in favour of the petitioner due to the attachment notice issued by the tax authorities. Accordingly, the petitioner filed a writ petition challenging the refusal of the registrar to register the sale deed – and sought issuance of direction to the income tax department to withdraw the said attachment.


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