Partneship firm taxability IN CAE OF LOSS

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A partnership firm experiencing business losses and absorbed depreciation wants to carry these forward to offset future profits, rather than distributing them to partners. The discussion clarifies that carrying forward losses is possible if the firm is liable for audit under Section 44AB and files its Income Tax Return (ITR) by the specified deadlines, along with the audit report. The payment of interest on capital to partners is determined by the terms outlined in the partnership deed.

jayesh khokhariya

jayesh khokhariya (Querist)

16 August 2023 Partnership Firm having loss (business loss and absorbed depreciation) firm want to carry forward loss and don't want to distribute to partner as partner's capital was not sufficient to set off business loss and absorbed depreciation. firm want to set off that business loss and absorbed depreciation against next year profit.
1). it is possible for firm to show that business loss and absorbed depreciation in balance sheet as accumulated loss and firm will set off that loss against profit of next year?
2). Firm can pay interest on capital to partner in case of loss in business?
We are covered under audit for AY 23-24

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

16 August 2023 1. Unless you are liable to audit u/s. 44 AB IT act, you cannot carry forward loss now u/s. 139(4) of IT act. As the date to file ITR u/s. 139(3) IT act was 31.07.2023.
2. What is the use if you cannot carry forward loss?

jayesh khokhariya

jayesh khokhariya (Querist)

16 August 2023 we are going for audit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

16 August 2023 In that case you can carry forward the losses and the UN-absorbed depreciation by filing ITR (31.10.2023) along with audit report till 30.09.2023.
Interest payment to partners depends upon terms specified in partnership deed, if any.

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