Amount of exemption U/s- 10(2A)

This query is : Resolved

AMIT (Querist)
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26 March 2009 A partnership firm, which is engaged in the business of construction, has developed a commercial complex. A part of this complex was let out to a company. The firm received rental income of Rs. 3,00,000 in the F.Y. 2007-08 and its P.&L.A/c is as under:
P.& L. A/c
To Interest to By Rental
Partners Income 3,00,000
A - 100000
B - 100000 2,00,000
To Net Profit
A - 50000
B - 50000 1,00,000

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Computation of Firm :-

Income from house property :
Rental Income 3,00,000
Less:Std. Ded. U/s 24(a) 90,000 210000

Income from Business :
Net profit as per P&L A/c 1,00,000
Less : Income of other head
(Rental Income) 3,00,000 -200000
--------- GROSS TOTAL INCOME 10,000
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In this case, firm will be liable to pay income tax on Rs. 10,000.
But my QUERY is that whether in the individual capacity of partners, they will be eligible to get exemption of Rs. 1,00,000 ( share in profit of firm as per P & L A/c)u/s 10(2A) or Rs. 10,000 only ( as per computation of return of income of the Firm)?

CA JAIMIN TRIVEDI

CA JAIMIN TRIVEDI (Expert)
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26 March 2009 Exemption as per Section 10(2A) is with regard to Share of profit received from firm and not share of income. So the share of profit in the firm's books is exempt, irrespective of the amount of taxable income.