The first relates to multi-disciplinary partnerships (MDPs). The Economic Times reports:
“India can soon boast of its own homegrown multidisciplinary majors like Ernst & Young and PwC, comprising professionals like Chartered Accountants, Company Secretaries, engineers, architects and MBAs under one roof, to cater to the rapidly-globalising corporate sector.This would enable professionals to establish multi-disciplinary practices thereby enabling them to provide different types of services to clients under one roof. However, from a legal standpoint, this may require amendments to the legislations governing these professions, such as the Chartered Accountants Act, 1949, the Company Secretaries Act, 1980 and the like.
Professional institutes like Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries (ICSI) and Institite of Cost and and Works Accountants (ICWAI) have initiated steps to work out arrangements to form multi-disciplinary partnerships (MDPs), though the big booster would be a formal go-ahead to limited liability partnerships (LLPs), the bill for which is likely to be cleared in the budget session of parliament.”
As to whether lawyers will be a part of MDPs, the news report states:
“However, there are some crucial issues that stand in the way of such MDPs. Currently, the Bar Council has not agreed to be a part of such firms and absence of legal eagles would certainly be a big miss.A second development relates to the availability of tax benefits to LLCs. The proposal allows LLPs to choose whether to tax the LLP itself as an entity or to tax its partners directly. Another report by the Economic Times:
Senior corporate law advocate U K Chaudhary said while Bar Council had no objection to LLPs between lawyers, it was yet to permit them to join other professionals in MDPs. "However, I feel that lawyers should be allowed to be part of such multi-disciplinary firms as this would open a whole opportunity for them," Chaudhary added.”
“The ministry of corporate affairs has recommended in a Cabinet note that it is an international practice to let LLPs choose the mode of taxation, based on how they are structured. If an LLP’s operations are de-centralised and the partners act autonomously, their income could be taxed in the hands of the partners.We could expect announcements on this front in the forthcoming Budget.
If the LLP has centralised operations and assets, then the LLP itself could be taxed. Outside investors, who form cross-border LLPs with Indian professionals, would prefer taxation at the partner-level instead of at the LLP-level as that would mean taxation only at one level.
If the LLP itself is taxed, the foreign partner in a cross-border partnership may end up paying tax in his country for his income from the partnership registered in India even if the LLP’s entire income has already been taxed in India.
Also, if the LLP generates income here as well as abroad, the entity will have to pay tax here even for the income that is generated abroad. Taxing individual partners will ensure that these disadvantages are eliminated. Taxation at the partner level means paying taxes in the respective countries by the partners for whatever income they get from the LLP. A partner in one country need not bear the burden of taxation in another.”