Loss of the firm

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sanjay

27 Points Posted on 21 March 2011

Query ;

A firm with two partners has assessed Carry forward loss of A.Y. 2008.09. One partner died in 2010.11. Can Remaining partner carry forward his share of loss in his individual capacity?

Can firm continue by introducing another partner, to carry forward the loss?

Section 78 reads as under.

Carry forward and set off of losses in case of change in constitution of firm or on succession.

⁷²78. ⁷³[(1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year.]

(2) Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income.

Kindly Give us your view,

Thanks and Regards

CA Sanjay Vora

93237 80138

ICAI Mem no.036907

22/24, Kazi Sayed street,

Mumbai 9

Replies (3)

Maheshkumar Sharma

134 Points Posted on 21 March 2011

this section only applies to the Firm. The firm cant carry forward the loss of the deceased partner. u have asked for the partners as in their individal capacity.

Individal partner is not taxable on the profit of the firm, so also not to set-off the loss against the taxable income.

Jay Bodha

Employed

139 Points Posted on 25 March 2011

the above qouted answer is correct as no such profit is included in your GTI similarly no such loss shall be deducted in your GTI.

and so the partners cannot carry forward the above stated loss

and for the firm :it can carry forward the loss in protion of the remaing members of the firm

sanjay

27 Points Posted on 25 March 2011

On the death of one of the two partners, can another person be admitted as partner? Can the new firm carry forward the loss of the old patner to the extent of his share?The purpose is to take advantage of the carry forward of loss of the share of the other existing partner.

Kindly revert

CA Sanjay Vora