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Pune Branch of WIRC of The Institute of Chartered Accountants of India

Residential Refresher Course Taxation of Partnership Firms CA CHANDRASHEKHAR V. CHITALE

Taxation of Partnerships Partnership – Meaning Assessment Business Income Capital Gains Organizational Changes Way Forward 1

Partnership – Meaning

Partnership – Meaning Two friends studying in a secondary school decide to sale crackers in Diwali holidays and share profits equally. They earn profit of Rs. 1.20 lac How the profits will be assessed? 1

Partnership – Meaning Section 2 (31) (iv) Section 2(23): Firm LLP 1

Partnership – Meaning Partnership Deed Registration under the Indian Partnership Act, 1932? Stamp Paper? 1

Partnership Business Lawful Business Illegal Act 1

Minor Can a ‘minor’ be a partner? Signature on the Deed Signature on the certified copy Assessment of remuneration Assessment of interest 1

HUF Can a ‘HUF’ be a partner? Why to admit HUF in firm? Partnership of Two HUFs Partnership of HUF and coparcener Assessment of remuneration Assessment of interest 1

Partnership Issues Can a ‘Firm’ be a partner? How to admit ‘Firm’ as a partner? Two Firms with same partners Partnership of Two Firms Joint Development Agreement and Partnership 1

Assessment

Assessment Partnership firm is constituted on 9-5-2015. Remuneration is paid to one working partner and to a HUF partner. Interest to all the partners @ 15% p.a. It wants to furnish return of income. What procedure firm should follow? What precautions firm should take in income computation? 1

Assessment Section 184 E- filing of Return File of Return Papers 1

Registration Section 184 Instrument of Partnership Signature on the Certified Copy Sign by a ‘minor’ Section 40(b) 1

Change in Constitution Partnership firm is constituted on 9-5-2014. It sustained loss of Rs. 3 lacs for A. Y. 2015-16. One partner with 30% share retired and the firm continued by the remaining two partners. It wants to furnish return of income. What procedure firm should follow? What precautions firm should take in income computation? 1

Change in Constitution Section 185 Section 78 (1) 1

Change in Constitution Partnership firm is dissolved on 9-12-2015. It has property of Rs. 50 lac (FMV Rs. 80 lac) and stock of Rs. 12 lac (FMV Rs. 20 lac). The business was taken over and continued by one partner as a proprietary entity. What procedure firm should follow? What precautions firm should take in income computation? 1

Change in Constitution Section 188 Section 45 ICDS 2 Supreme Court judgments 1

Business Income ICDS 2 24. In case of dissolution of a partnership firm or association of person or body of individuals, notwithstanding whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the net realisable value. 1

Business Income A.L.A. Firm 102 ITR 622 (SC) Sakthi Trading Co vs CIT118 TAXMAN 301 (SC) 1

Business Income

Business Income Business Income Remuneration Interest Estimated Income Scheme 1

Business Income Mr. Apple is receiving salary from employment amounting to Rs. 20 lacs. He has invested in capital of his Son’s firm Rs. 50 lacs. Should firm pay interest to him? Mr. Bell has borrowed Rs. 50 lacs to invest in firm’s capital Rs. 50 lacs. Should firm pay interest to him? 1

Business Income M/s. Goa Cashew Company for F.Y. 2015-16 has a turnover of Rs. 80 lacs. Accounts reflect Net Profit of Rs. 20 lacs. For reducing income should it pay interest and remuneration to partners? Reporting of the entire income is mandatory for the firm? 1

Capital Gain

Capital Gain Section 45 (1) Section 45 (3) Section 45 (4) Section 54 D Section 54 EC Section 54 G Section 54 GA 1

Capital Gain Elora Constructions admits a partner Deva. Deva enters into a development agreement with the firm for a plot of land he owns and receives four flats (FMV of flats Rs. 1 cr.) How to ascertain capital gains tax? Will answer change, where FMV of land is 1.20 cr.? 1

Taxation Baga Constructions admits a partner Deva. Deva enters into a development agreement with the firm for a plot of land he owns and receives four flats (FMV of flats Rs. 1 cr.) Can Deva save capital gains tax as he is acquiring 4 adjoining flats? Is there any other way to save tax? 1

Loss

Loss Return Section 78 (1) Section 32 (2) 1

Organizational Changes

Organizational Changes Conversion into: LLP Company Proprietorship 1

Organizational Changes Tax Liability Section 188A Section 189 1

Way Forward

Way Forward Risk Participants Tax Advantages Combination of Entities Professionals 1

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