SETOFF OF OLD FIRM LOSS

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2010 THERE IS A PARTNERSHIP FIRM(VENKAT SILKS) WITH 7 PARTNERS UPTO 31-3-08.AND THE LOSS OF FIRM IS RS.36 LACS AS ON 31-3-08.IN F.Y.2008-09 6 PARTNERS RETIRED AND 1 NEW PARTNER JOINED IN THE FIRM.
IN F.Y.2009-10 THE BALANCE 2 PARTNERS CHANGE THE NAME OF THE FIRM AS (SIVARAM SILKS)TAKING OVER ASSETS AND LIABILITIES OF VENKAT SILKS.
MY QUESTION IS CAN SIVARAM SILKS(HAVING ONE PARTNER AT THE TIME OF 36LACS LOSS AND THE NEW PARTNER NOT THERE AT THE TIME OF LOSS OCCURANCE IN VENKAT SILKS) CAN SETOFF THE LOSSES OF OLDFIRM(VENKAT SILKS) AGAINST ITS PROFITS IN F.Y.2009-10
IF THERE IS ANY CASE LAW PLEASE QUOTE.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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25 July 2010 Venkat Silks loss as on 31.3.08 was Rs 36L.
Out of the above the shares of six outgoing partners in F Y 2008-09 will be debited to their respective capital accounts and as such the loss in respect of the remaining one partner only, would be available for set off against the income of FY 2008-09.
(you would have mentioned the date of admission and retirement in FY 2008-09 for clarity of the issue)
A If all the old partners were sharing losses equally then the remaining amount of loss in firm's hand would be only 5 lacs approx at the end of FY 2008-09 which is subject to set off against profits of FY 2008-09.

In FY 2009-10 the old firm has been succeeded by the new firm and in my opinion this case squarely lies under Section 188. In such case in accordance with Section 170 two separate assessments will be made.

So I opine that the new firm will not be allowed to
carry forward the losses of old firm. I welcome the opinion of other experts also.

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