Income of a partnership Firm

how to prepare a P&L a/c for partnership firm engaged in s/w business. the expenses which are aloowed & disallowed while calculating the profit/loss. the company is filing the return for the first year, though its registered in 2005. till 2008-09  there was no revenues, in 2009-10 some revenues are generating, eventhough the company is in loss. please help. purchase of computers,it has 7 employees & 9 computers(among 9, 3nos was purchases in 2007, 3 nos in 2008& 3 during 2009), purchase of domains,softwares, imagesetc for the websites etc are the expenses. The company is operating partly for a US based company, so every month the US company will be transfering foreign money to the said  company's bank a/c. Pls help, i am desperatly in need

Replies (2)

Dear Mam,

From FY 2005-06 it is mandatory for a Partnership firm to file its return of Income. This is irrespective of the fact that it has any income or not or it is liable for Tax audit or not.

As u mentioned that the Firm was incurring losses (other then on account of Depreciation), so the same could have been carried forward had the firm filed its return within due date but now not possible.

 Unabsorbed Depreciation(or Loss on account of Depreciation) in respect of earlier years can still be setoff with with the current years profit/income.

Rate of Depriciation on computers is 60% on WDV menthod & has to be claimed from the year in which computers were installed.

Since the return is to be filed for the first time Sec 184 is to be complied & a certified copy of Partnership deed it required to be submitted.

Amir has explained the Income Tax procedure pretty well, you had a question how to prepare P & L a/c for a firm engaged in software business:

a) Take the bank statement, along with all possible bills and other financial documents and start processing the same i.e. enetering the same in Tally

While prepapring the accounts you may follow cash or merchantile as you feel right as this first year and section 145 comes to your rescue but preferable option in the long run is accrual

b) Year on year close the issue and then update the Income Tax Returns

c) Returns for FY 2005-06, 2006-07 would be invalid returns due to the time limit

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