Partnership

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 September 2014 WHETHER A PARTNERSHIP FIRM CAN BECOME PARTNER OF ANOTHER PARTNERSHIP FIRM UNDER THE PARTNERSHIP ACT,
IF YES , WHAT ARE THE CONSEQUENTIAL IMPLICATION UNDER THE INCOME TAX ACT FOR SHARE OF PROFIT RECEIVED ? WHETHER THE SAME IS EXEMPT IN HAND OF RECIPIENT PARTNERSHIP FIRM?

CA VISHWAKEERTHI.P.S.

CA VISHWAKEERTHI.P.S. (Expert)
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04 October 2014 No.

Partnership firm can't be partner in another firm.

Reason and who are can be partner:

In law a partnership is not a juristic person by it definition while a company is an artificial juristic person capable of holding all human rights except citizenship rights.In HUF cases its Karta is manager of HUF and have all exclusive control over HUF affairs and has powers to bind HUF by his all deeds and any opposition of its other member results in break down of HUF.
But such is not the case of a PARTNERSHIP.No case law is required for it.your googling result in negative is the correct view whether supported by case law or not.You are advised to carefully read the its definitionin section 4 of the partnership Act,which runs:
"4. DEFINITION OF "PARTNERSHIP", "PARTNER", "FIRM" AND "FIRM-NAME".

"Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm-name"."

What do you find then that it's a collective name of individuals but the liability of partners with regard to its business is just like a proprietorship,not limited to their share in business but also personal properties of the partners are on stake.That is not the case of a company share holder,they are all togather different two legal entities and the liability of the share holder is limited to his capital invested in the company,his personal properties are not in stake.You can go with definition of a company in companies ACT.

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