Can one partnership firm give loan to another partnshp firm?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2016 Dear Experts

Firm -ABCD having 4 partners named A,B,C, D
Firm- EFGH having 4 partners named E,F,G,H

Can firm ABCD give loan to firm EFGH?
As ABCD is incurring all the expenses on behalf of EFGH?

Please elaborate.

Amol S Joglekar

Amol S Joglekar (Expert)
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20 May 2016 there is no any inverse provision as such for giving loan. So long as the deed of partnership empowers the partners so to do, the BUSINESS loan may be given as per the rules of trade.

Rupesh Jain

Rupesh Jain (Expert)
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20 May 2016 you can give loan but for what purpose, due to business its easy, otherwise you have to face many question form income tax deptt. please take care regarding the rate of intt.

Rupesh Jain

Rupesh Jain (Expert)
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20 May 2016 you can give loan but for what purpose, due to business its easy, otherwise you have to face many question form income tax deptt. please take care regarding the rate of intt.

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2016 actually ABCD firm is incurring all the expenses on behalf of Firm EFGH. ie: daily expenses of firm EFGH are booked in the books of firm ABCD books.

In the books of ABCD the total amount is Rs. 5.40 lacs on account of expenses of firm EFGH which will be recovered from EFGH once they will start earning sufficient income.

Pls. advise

Rupesh Jain

Rupesh Jain (Expert)
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20 May 2016 pls clear the arrangement between the partner ship firms.

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2016 Firm ABCD is running since last 5 years...having 4 partners A/B/C/D
Firm EFGH is running since last 1 year only...having 4 partners E/F/G/H

All the partners of EGFH are relatives of ABCD.

RIght from the begining of EFGH firm....all the expenses of EFGH are incuured by ABCD firm only.....

in the books of ABCD following entries are being done-
EFGH a/c Dr....
To Cash/Bank
because there is no books are yet opened for EFGH firm.

Now query is that is there any tax complication in the books of ABCD firm to show such a huge amount of Rs. 5.40 Lacs on b/s date?

Querist : Anonymous

Querist : Anonymous (Querist)

21 May 2016 Please help me on this matter