The Hon’ble Union Finance Minister while presenting the Union Budget for the year 2010-11 announced a series of exemption benefits.  In relation to LLPs, while converting a private company or unlisted public company into LLP, capital gain tax exemption will be available subject to the following conditions being satisfied.

i) The total sales, turnover or gross receipts in business of the company do not exceed sixty lakh rupees in any of the three preceding previous years;

ii) The shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company;

iii) No consideration other than share in profit and capital contribution in the LLP arises to partners;

iv) The erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent of the profits of the LLP for a period of 5 years from the date of conversion;

v) All assets and liabilities of the company become the assets and liabilities of the LLP; and

vi) No amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion.

Source : Union Budget 2010-11

Chennai, March 1

An award of the Industrial Tribunal, Chennai, rejecting the claim for relief by a contract labour for “reinstatement” in the State Bank of India’s branch at Madurai has been upheld by the Madras High Court. Stating that the petitioner, Mr M. Vinayakamurthy, had not let in evidence to the satisfaction of the Tribunal that he was an employee of the Bank, the Court ruled that no fault could be found with the impugned order passed by the Tribunal.

The case of the writ petitioner was that he was engaged by the Bank (R-1) for maintenance of generator and water tank and he was paid Rs 50 per week for generator maintenance and Rs 5 for water tank maintenance. He requested for increase in the weekly payment and it was increased from November, 1, 1990. Thereafter, the amount of payment was enhanced to Rs 800 a month.

When he reported for duty on December 4, 1992, he was informed that he was dismissed from service by the Branch Manager. He took up the matter with the Assistant Labour Commissioner (Central), and on a failure report sent to the Government of India, Ministry of Labour, the matter was referred for adjudication by R-2 (Tribunal) on April, 29, 1994.

The Bank contended before the Tribunal that the petitioner was not at an employee and he was only engaged on contract. The petitioner’s claim that he was paid overtime allowance and that he had a continuous service of 240 days was denied. The Bank further contended that the petitioner himself had applied for a loan for establishing an individual business and that was also sanctioned by the Bank. Therefore, it could not be contended that he could be a workman within the meaning of Section 2(8) of Industrial Disputes Act.

The Tribunal came to the conclusion that the petitioner was not a workman of the Bank and he was only a contractor. Even assuming that he was an employee, since he was given work for a fixed duration, his termination could not be a “retrenchment” and would be hit by Section 2(OO)(bb) of ID Act. Hence, he was not eligible for any relief.

The Bank cited the judgment of Supreme Court in Punjab National Bank vs Ghulam Dastagir [1978(1)LLJ 312]. The apex court dealt with case of a personal driver of a manager of the Bank who claimed to be an employee of the Bank. The Court found that in the absence of any direct employment by the Bank, merely because the said employee was discharging some work by going along with the manager, he could not be considered an employee of the Bank.

Mr Justice K. Chandru ruled that the petitioner was allowed to attend maintenance work for which he was paid on piece rate basis. Hence, no fault could be found with the impugned award of the Tribunal. Further, in exercise of powers conferred under Article 226 of Constitution, the award did not call for any interference. The writ petition stood dismissed.

Source: Business Line