taxability of salary from partnership firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2013 can i take the benifit of Presumptive taxation U/s 44AD for the salary income for a partner ,Received from A partnership firm ?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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29 July 2013 Salary received from the firm has arisen due to the fact that the firm has carried on the business through partner. He can be said almost as an agent of firm.
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The eligible assessee in such a case is the firm.
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Further, in my view, salary received from the firm is not treated as turnover or gross receipts.
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So, Salary from the firm has to be shown
at full. Such income can not be shown U/s 44AD.
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CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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29 July 2013 You can not apply section 44AD for salary income received from partnership firm. Beacue your salary will be assessed under the haed of Salary. Section 44AD will be applies only for Buinsess assessee and it will be assessed under the head of Business and profession.

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Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2013 Dear paras bafna sir,

pls elaborate

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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12 August 2013 As per Section 28(v) salary received by a partner from a partnership firm is taxable as business income.

Accordingly benefit of Section 44AD will be AVAILABLE.

The salary shall be taken to be the gross receipts.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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12 August 2013 "As per Section 28(v) salary received by a partner from a partnership firm is taxable as business income. Accordingly benefit of Section 44AD will be AVAILABLE. The salary shall be taken to be the gross receipts."
- Expert Siddharth
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Section 44AD -applies to an eligible assessee who carry on an eligible business.
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Under the Income Tax Act the relation ship of partner and firm is well defined.
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A working partner receives salary from the firm which does not mean that becoming a partner in a firm is an eligible business.
Eligible assessee is that person who directly computes the Business Income in his hand.
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Let us take an example of a Karta of one HUF who receives salary from the HUF for his service to the HUF business. Such Salary is taxable under the head ....Salary Income.
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There is not much difference in the services rendered by a Karta and by a partner.
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As pointed out by Mr. Siddharth, Salary to a partner is taxed under the head PGBP, by virtue of Section 28(v).
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Had Section 28(v) be not there in the Act, The same will also be taxed under the head Salary Income.
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And ....this income is treated really as a "Salary Income" for the limited purpose of Section 44AD only.
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For all other purposes it will be considered as PGBP, but under Section 44AD, it can not be.
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The reason.....
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Please read the First line of Sub Section (1) of Section 44AD... Section 28(v) ....has been expelled
by inserting the phrase "Notwithstanding anything..... "
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