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Advice needed on filing for partnership firm

shalini (CA) (525 Points)

16 July 2014

My client has a partnership firm. In April 2013 they bought frachise and started running small school. His annual receipts in AY 2014-15 are16 lacs and his expenses are 22 lacs so it is a loss. After running school for one year they sold the frachise in May 2014. Please advise me on this points-

1. Do we require audit for filing loss for partnership firm?

2. Can they carry forward the loss to next year and set off against gain from selling franchise?

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4 Replies

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 16 July 2014

1. no need for tax audit, but the firm can get his accounts audited at its will.... 2. loss can be carried forward if return filed within due date, which in your case is 31st july.

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shivam gupta (Student) (142 Points)
Replied 17 July 2014

Originally posted by : shalini
	My client has a partnership firm. In April 2013 they bought frachise and started running small school. His annual receipts in AY 2014-15 are16 lacs and his expenses are 22 lacs so it is a loss. After running school for one year they sold the frachise in May 2014. Please advise me on this points- 1. Do we require audit for filing loss for partnership firm? 2. Can they carry forward the loss to next year and set off against gain from selling franchise?

Sale of franchise attracts capital gain & in your case its short term capital gain. Business loss in the year of occuring will be first set off with same head i.e PGBP (Except Speculative income) & in case the same is brought forward then it can only be adjusted with same head i.e PGBP income. Since in your case it is a brought forward loss hence it can only be adjusted against same head i.e Brought forward business loss cant be set off against Cap gain.

& if you current year receipts(From Business ncome) is more than 1 Crore then Tax Audit is compulsory & if receipts is less than 1 crore then its optional.

shalini (CA) (525 Points)
Replied 17 July 2014

Thanks. I have one more confusion. My client formed partnership firm in Nov 2012 and got pan card also in the same month. Then they started doing some transactions like purchasing furniture for the school,bought franchise,books etc. and in february they took advances from few parents for the new session starting from June 2013.But actually their school started running from June 2013. They did not file any return for Previous year 2012-13. Now do i need to file for both the years or i can file one combined return from Nov 2012 to March 2014? Please help me on this.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 18 July 2014

it would be better if you file two diff returns for those years.. in first year there will be loss as there was no income and from second year you can show income as per books. one more thing that loss of first year wont be carried forward for set off because return not filed within due date.