80-ic claim and profit exemption in the hands of partners.

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anoop bhatia (Querist)

26 April 2012 As per section 10(2) the profit share from firm is exempt in the hands of partners.

I want to know whether this is also applicable where a firm is taking benefit of 80-IC i.e. in himachal or uttrakhand where these firms are not required to pay any income tax.

Hence in this case also the whole share of profit from firm is also exempt.

Please provide the resolution.

Thanks.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

26 April 2012 Remuneration and Salary Received from firm is taxable as business income in the hands of partners. Share in Profit is exempt in every case.
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Section 10(2) is a specific section providing exemption to firm's profits in the hands of partners as the firm is liable to tax at maximum marginal rate of 30%.
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Amol S Joglekar

Amol S Joglekar (Expert)

27 April 2012 Sorry to bother you Anoop. I could not understand what is your focuss in the query? Do you mean to ask if sec 10(2) applicable in HimachalPradesh / Uttarakhand? (Answer is YES)

jagadish hiremath

jagadish hiremath (Expert)

27 April 2012 I think there is no bar on enjoying the benefit of share of profit from u/s. 10(2) even though firm is claiming exemption its income u/s 80 IC. So no need to bother as there is no any states excluded in Sec 10(2).

anoop bhatia

anoop bhatia (Querist)

27 April 2012 Sir,

In clear words the question is if the firm is paying 30%+ income tax, the share of profit is exempt in the hands of partners.

But in case firm is enjoying benefit of Sec 80-IC and not paying any income tax, will in this case also the share of profit exempt in the hands of partners.

I am asking this because if it would be company there would be implication of MAT and CDT if profit is distributed.

But here the partners are enjoying full benefit on share of profit where no tax is paid by firm and themselves.

Amol S Joglekar

Amol S Joglekar (Expert)

27 April 2012 Yes. The share of profit is exempt in the hands of partners irrespective of the fact whether or not firm pays income tax. 10(2)

Prakash Kochar

Prakash Kochar (Expert)

28 April 2012 Where the firm is eligible for 100% deduction u/s. 80IC, there will remain NIL income for allocation to partners as share income under I.Tax Provisions.
If allowable deduction is 25% balance income will be liable for tax in firms hand,this taxed income will be allocated as share to partners, which qualifies for exclusion u/s. 10(2A){not under sect. 10(2)}
Share income is not taxable in hands of partners, in all the cases.