Same partners in different firms.
This query is : Open
24 July 2019
If partners of a Firm want to create another firm with the same set of partners and same percentage of share of profits for convenience purpose, is it allowable? Will the income of both the firms be merged in the hands of AO??
24 July 2019
Chances of clubbing can be expected, if nature of business is one and the same.
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25 July 2019
Thank you Sir. If the nature of business is completely different, can they create another firm?
25 December 2023
If two partnership firms with same partners and same profit sharing ratios are constituted may be for same line of business or for different line of business then in my opinion they are to be assessed as a single firm.
If they are allowed to have multiple firms with same partners and same ratio then each firm shall get different PAN, different registration and they shall be claiming allowable remuneration to partners in terms of s. 40(b) for each firm and thereby the remuneration allowable shall be higher as compared to consolidated one.
To put it simply, each firm shall be allowed to pay remuneration @ 90% of first 3 lakhs of book profit.
Therefore, in my opinion multiple firms with same partners and same profit sharing ratio should not exist and instead they should be treated as one firm.
For different verticals, i.e. different line of activities one may have multiple GSTINs and need not constitute multiple firms. One may have different trade names for different branches, different nature of business but should have only one Legal Name.
If they are allowed to have multiple firms with same partners and same ratio then each firm shall get different PAN, different registration and they shall be claiming allowable remuneration to partners in terms of s. 40(b) for each firm and thereby the remuneration allowable shall be higher as compared to consolidated one.
To put it simply, each firm shall be allowed to pay remuneration @ 90% of first 3 lakhs of book profit.
Therefore, in my opinion multiple firms with same partners and same profit sharing ratio should not exist and instead they should be treated as one firm.
For different verticals, i.e. different line of activities one may have multiple GSTINs and need not constitute multiple firms. One may have different trade names for different branches, different nature of business but should have only one Legal Name.
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