Same partners in different firms.
This query is : Open
24 July 2019
If partners of a Firm want to create another firm with the same set of partners and same percentage of share of profits for convenience purpose, is it allowable? Will the income of both the firms be merged in the hands of AO??
24 July 2019
Chances of clubbing can be expected, if nature of business is one and the same.
Message likes :
1 times
25 July 2019
Thank you Sir. If the nature of business is completely different, can they create another firm?
25 December 2023
If two partnership firms with same partners and same profit sharing ratios are constituted may be for same line of business or for different line of business then in my opinion they are to be assessed as a single firm.
If they are allowed to have multiple firms with same partners and same ratio then each firm shall get different PAN, different registration and they shall be claiming allowable remuneration to partners in terms of s. 40(b) for each firm and thereby the remuneration allowable shall be higher as compared to consolidated one.
To put it simply, each firm shall be allowed to pay remuneration @ 90% of first 3 lakhs of book profit.
Therefore, in my opinion multiple firms with same partners and same profit sharing ratio should not exist and instead they should be treated as one firm.
For different verticals, i.e. different line of activities one may have multiple GSTINs and need not constitute multiple firms. One may have different trade names for different branches, different nature of business but should have only one Legal Name.
If they are allowed to have multiple firms with same partners and same ratio then each firm shall get different PAN, different registration and they shall be claiming allowable remuneration to partners in terms of s. 40(b) for each firm and thereby the remuneration allowable shall be higher as compared to consolidated one.
To put it simply, each firm shall be allowed to pay remuneration @ 90% of first 3 lakhs of book profit.
Therefore, in my opinion multiple firms with same partners and same profit sharing ratio should not exist and instead they should be treated as one firm.
For different verticals, i.e. different line of activities one may have multiple GSTINs and need not constitute multiple firms. One may have different trade names for different branches, different nature of business but should have only one Legal Name.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Claiming exemption of perquisite for employee-owned car under New Tax Regime in ITR-2
- PPF interest-As Exempt Income disclosure
- Gift of mutual fund units to daughter
- Pass word to open justification report for Q1 for FY 2026-27
- Section 194JA & JB Income which ITR Form to use
- Scrutiny and reopening of past returns
- Under construction property in ITR
- Upload Level ValidationITR3Category of Defect B/D
- Reporting of STCG on Property in ITR
- Building tax payment deduction in rental Income
- Can partnership firm show income under 44ad
- FEMA regulation Act. for inward remitance
- PF Taxable Income
- Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3
- Interest credited in FY2025-2026 & TDS therein by EPFO does not reflect in AIS or Form 26AS
- 44ad eligble money lending interest
- Delisted shares sold in off market/ Rebate u/s87A
- In Exports Sales HSN details where to fill
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- Difference in tax comparison report
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
