Can two partnership firms form a new firm ?

This query is : Resolved

CA Abhishek Singh (Querist)
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28 May 2013 Hello everyone,

suppose AB & CO, CD & CO are two partnership firms.

Now they both want to form a partnership firm to carry a particualr business.

can they form a partnership firm and if yes then can the partners of both the firms (are working partners) can claim the remuneration as per section 40(b) ?

CA VISHNU GAVKARE

CA VISHNU GAVKARE (Expert)
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29 May 2013 Yes two firms can form new firm as partnership is between 2 or more persons and not Individuals. But from new firm partners of old firm can not claim remuneration as remuneration is allowed to working partner. A firm being an unnatural person can not be a working partner. hence no remuneration allowed.
Hence it is advised that partners of old firms becomes partners in new firm rather making their respective as partner.