Firm as a patrner

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Dear Sir,

A and B are partners in a firm X with a profit sharing ratio of 40:60. This firm - X -enters into a partnership with another partnership firm Y with a 10% share with four other natural persons C,D E and F and G a minor is also admitted to the benifits of partnership represented by the parent. The profit sharing ratio in firm Y is, X the firm 10%, C 25% D20%, E 25%, F10% and G the minor 10%. If there is firm in which another firm is a partner it cannot claim registration under the income tax act to avail the benefit of interest paid to partners and working partners remuneration as it is not a valid partnership firm. Then the remedy it appears is to show that A and B are the partners represented by the Firm X with a sharing capactity of 4% and 6% . Assuming that this is a valid way out, how should the profit and interrest  derived  by firm X from  firm Y in their books of account. Can an amended partnership deed with a  recital that A and B shall have a sharing of 4% and 6% and that they shall be jointly represented by the firm X in the second firm Y, and signed by both A and B  would meet the requirement of law to claim the  benifits of registration the firm with the income tax authorities? While filing the income tax return how should X be shown in the status code - as a individual or AOP or BOI or Firm or should A and B alone be stated as partners as individuals. There is a compelling reason to show X as a partner in Firm Y.   

May be the case of Chhotalal Devchand v Commissioner of Income Tax 1958 34 ITR 351 (Bom) and 1977 107 ITR 361 (Bom) would throw some light on the subject?

Regards

j.r.kota

Replies (1)

Dear Sir,

Though it is more than two months not even s single reply has come for this query. Does it mean that I have asked for such a basic one which does not merit any attention?

Would any body respond to this

regards

jr kota


CCI Pro

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