In leaves with Kranz anatomy, formation of malic acid during CO2 fixation occurs in

The correct option is mesophyll.

Detailed Explanation:
Plants that inhabit dry, tropical regions utilize the C₄ photosynthetic pathway, which is characterized by a specialized leaf anatomy known as Kranz anatomy ("Kranz" means wreath, reflecting the arrangement of bundle sheath cells around the vascular bundles). In these plants, carbon dioxide fixation is spatially divided between two distinct types of cells: mesophyll cells and bundle sheath cells.

Here is a step-by-step breakdown of the process:
1. Initial CO₂ Fixation: Atmospheric carbon dioxide enters the leaf through the stomata and diffuses into the mesophyll cells. Here, the primary acceptor of CO₂ is a 3-carbon compound called phosphoenolpyruvate (PEP).
2. Carboxylation: The enzyme phosphoenolpyruvate carboxylase (PEP carboxylase) catalyzes the reaction between PEP and bicarbonate to form the 4-carbon compound, oxaloacetic acid (OAA):
$\mathrm{PEP}+{\mathrm{HCO}}_3^{-}\to \mathrm{OAA}+P_i$
3. Formation of Malic Acid: Oxaloacetic acid (OAA) is rapidly reduced to malic acid (or converted to aspartic acid) within the chloroplasts of the mesophyll cells.
4. Transport and Decarboxylation: Once formed in the mesophyll cells, malic acid is transported through plasmodesmata into the bundle sheath cells. In the bundle sheath cells, malic acid is decarboxylated to release carbon dioxide and a 3-carbon compound (pyruvic acid). The released carbon dioxide is then fixed by RuBisCO in the Calvin cycle (C₃ pathway) to produce sugars, while the pyruvic acid is transported back to the mesophyll cells to regenerate PEP.

Therefore, the initial formation of malic acid during CO₂ fixation takes place in the mesophyll cells.