Remuneration

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 February 2015 In One Partnership Firm, another partnership firm is a partner then first partnership frim can pay remuneration to another one??

Thnaks in advance

CA Mehta Ankur N.

CA Mehta Ankur N. (Expert)
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14 February 2015 No,

A partnership firm is not a person and therefore a firm can not enter into partnership with any firm or individual.

So No Que. of remuneration will be arise.

Querist : Anonymous

Querist : Anonymous (Querist)

14 February 2015 but it is fact that one partnership firm is a partner in another partnership firm.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Question:
Can one partnership firm be a partner in another partnership firm and can the first firm pay remuneration to the second firm (which is a partner)?

Legal Position:
Can a Partnership Firm be a Partner?

Under traditional partnership law (e.g., Indian Partnership Act, 1932), a partnership is an association of natural persons.

A partnership firm itself is not a 'person' in the legal sense; it has no separate legal entity distinct from its partners.

Therefore, a partnership firm cannot be a partner in another partnership firm (since a partner must be a natural person or, in some jurisdictions, a company or LLP).

However, in practice, it is possible for a partnership firm to be admitted as a partner through its partners acting on its behalf (this is called a "partnership firm as a partner" or a "partner firm").

This is often done by the partners of the first firm acting as "agents" or representatives of that firm in the second firm.

This creates a kind of "partnership in partnership" arrangement but is more a matter of contractual understanding rather than a strict legal partnership entity.

Remuneration to a Partnership Firm?

If the second partnership firm is considered a partner (as per deed/arrangement), then the first firm cannot pay remuneration to it as a partner.

Why? Because partnership income or remuneration is payable to partners who are natural persons (or entities recognized as partners).

The remuneration or share of profit is paid to individual partners, not to the firm entity itself.

The income or remuneration received by the second firm (which is a partner) will then be distributed among its partners as per their agreement.

So Why Does This Happen in Reality?
Sometimes for tax planning or business reasons, partnership firms enter into agreements where one firm acts as a partner in another firm.

Legally, this is a grey area and not strictly recognized as per classical partnership laws.

Tax authorities may treat such arrangements as accepting the effective receipt by individual partners of the second firm rather than the firm itself.

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