The provisions concerning “conversion to an LLP form” are contained in section 58 (Registration and effect of conversion) of the LLP Act, 2008.
Section 58(4)(b) of the LLP Act, 2008 reads as-
“all tangible (movable or immovable) and intangible property vested in the firm or the company, as the case may be, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, as the case may be, and the whole of the undertaking of the firm or the company, as the case may be, shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed;”
From the aforementioned section, it is apparent that all the assets of a partnership firm automatically vest in the LLP on conversion to the latter form.
In such situations, whether stamp duty and registration fees need to be paid in relation to the assets that stand transferred on conversion, is dependent on the event that gives rise to the liability to pay registration fees and stamp duty.
Section 3 of the Indian Stamp Act talks about the instruments, which are chargeable with duties. Once there is no instrument of transfer of assets of erstwhile partnership firm to LLP, then the question of payment of stamp duty on it does not arise.
Further, the registration fee is payable on an instrument compulsorily registerable under section 17 of the Registration Act. Once there is no transfer of immovable property under an instrument, then the question of compulsory registration of that non-existent instrument and payment of stamp duty on it is not warranted.
In case of conversion of partnership firm to an LLP form, the transfer of assets is by operation of law. The transfer being pursuant to statutory vesting, no other separate instrument of transfer is needed.
Hence, in case of such conversion, there is no liability to pay stamp duty or registration fees. The view is backed by the judgment of Himachal Pradesh HC in the case M/S. SOZIN FLORA PHARMA LLP VERSUS STATE OF HIMACHAL PRADESH AND ANOTHER dated 7.01.2021.
