aman gupt (FPS) (49 Points)
29 March 2011Hi All,
If a partner has earned any amount against his PAN in the previous year, will this income be treated as his personal income or can be clubbed with the firm's income.
Any information would be of great help.
Thanks.
Aman
Devendra
(Chartered Accountant)
(4775 Points)
Replied 29 March 2011
I think so the Income earned by the Partner against his own PAN will be his Personal Income and will be taxed in his own hands.
Regards,
Devendra K
aman gupt
(FPS)
(49 Points)
Replied 29 March 2011
Thanks Devendra,,,but dont u think that way a firm can keep on avoiding tax @ 30% by accepting payments in partner's name till the time a partner's salary reaches tax slab of 20 % or 30% i.e upto Rs. 5,00,000/-.
U S Sharma
(glidor@gmail.com)
(21056 Points)
Replied 29 March 2011
in such cases where the income source is disputed, the department has its own measures to take the PAN holder under tax review.
in a firm the firm's PAN is used for all its transactions, not the partners,
if a person is partner in a firm, that does not limit his own personal earnings, he can use to have proprietorship concern also alongwith firm, or be a director in companies, there is no bar for being at multiple places of business and earning through them.
aman gupt
(FPS)
(49 Points)
Replied 29 March 2011
Dear Mr. Sharma,
Thanks for your detailed reply.
As per the partnership act 1932, there is a seperate section whereby it is stated that:
"if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business" - a situation if he/she acts as a sole proprietor for the other business or even if he is a partner with another firm.
which if contained in the contract between partners makes a partner liable to transfer his/her profits/income to the firm, which in very case would result in increase in firm's income and hence more tax liability for the firm if corresponding expenditures are not available.
whereas if this clause is simply excluded from the contract, partners can keep on earning income in their personal capacity, show it as capital contribution in the firm, earn interest on it and save tax upto any limit. Even if there are two partners, they can save tax upto atleast Rs. 5,60,000/-.
Please advise.
Regards
Aman
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