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Investment in partnership firm

Shakir Ravjani (Student) (192 Points)

07 July 2018

Investment in partnership firm where to show in Income tax return?

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7 Replies

KOUSHAL JAIN (Chartered Accountant) (471 Points)
Replied 07 July 2018

Interest and Remuneration received from Partnership Firm taxable in hands of partner as Income from PGBP.

Anjali P Nair (ACA,ACMA) (582 Points)
Replied 07 July 2018

Interest on capital and remuneration received from firm can be shown under Income from business or profession.

Profit from firm is exempted under section 10(2A).it should be shown under exempted income in ITR 3.

There is no need to show investment(capital contribution) in partnership firm in IT return.

Shakir Ravjani (Student) (192 Points)
Replied 07 July 2018

than how balance sheet will tally

CA Sunil Kumar (Chartered Accountant) (4514 Points)
Replied 07 July 2018

If partner doesn't have any sole proprietorship business, then there is no need to fill balance sheet and profit and loss account.

RAJA P M ("Do the Right Thing...!!!") (127249 Points)
Replied 07 July 2018

@ Mr. Shakir Ravjani.,

Can You explain Your 1st query

Shakir Ravjani (Student) (192 Points)
Replied 07 July 2018

an individual who is partner in a firm and have own business separately so, he will file ITR 3.

In ITR 3 we have to file Balance sheet and profit and loss account.

This individual who is partner in firm that means he has made investment in the firm which show as investment in own(individual) balance sheet....so this investment figure where to show in ITR 3 in balance sheet.?

In ITR 3 there is not separate tab for this type of investment.

CA Shubham Maloo (S M & Co) (46 Points)
Replied 16 August 2023

1. Classification as per Nature of Investment:

Non-current Investment: If the company intends to hold the investment in the partnership firm for a period exceeding one year, it should be classified as a non-current investment.
Current Investment: If the company plans to hold the investment for less than a year, then it would be termed as a current investment.

2. Presentation in the Balance Sheet:

Non-current Investments: These should be shown under the head 'Non-Current Assets' in the balance sheet. Further, within this section, it would come under the sub-head 'Financial Assets' and then under 'Investments'.
Current Investments: If the investment is classified as current, it will be shown under the 'Current Assets' section, specifically under 'Financial Assets' and subsequently under 'Investments'.

3. Disclosure Requirements:

The company should provide appropriate notes and disclosures related to the investment as per the applicable accounting standards and Schedule III requirements. This would typically include details about the nature of the investment, the amount invested, terms and conditions if any, and any other relevant information.
If the private limited company has significant influence in the partnership firm, then further disclosures regarding the associate (the partnership firm) might be necessary, which would be guided by Ind AS 28 on Investments in Associates and Joint Ventures.

4. Valuation and Impairment:

The company must periodically assess the carrying value of its investment in the partnership firm. If there's any indication that the investment might be impaired, the company should determine the recoverable amount and recognize an impairment loss if necessary.

5. Equity Accounting:

If the company has significant influence (but not control) over the partnership firm, it might have to use the equity method for accounting, as prescribed under Ind AS 28. Under this method, the investment is initially recognized at cost, and subsequently adjusted for the company's share of post-acquisition changes in the net assets of the partnership firm.