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querry related to partnership Firm

GOPAL KUMAR AGRAWAL (PARTNER) (205 Points)

02 July 2009

If Husband and Wife wants to form a partnership firm in the equal share profit ratio and wife are not a qualified she is just a housewife, after formation of Firm if she gets Interest and remuneration from the partnership firm in that case the provision of Clubbing of Income under section 64 of the Income Tax Act will be applicable or not. Please advice.

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12 Replies

(Guest)

Hi Gopal,

Incase of remuneration it will be clubbed with your income since your wife is house wife. In case of interest, if it is earned by investing money which you provided to her then it will be clubbed with your income if the investment is done through pin money of your wife then no clubbing provision can be invoked in such a case.

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CA. Gurdeep Singh Chawla (C A) (7080 Points)
Replied 02 July 2009

clubbing provision is not applicable.

(Guest)

Hi Gurdeep,

can you please cite the reason for not invoking clubbing provision.

RAJU (LEARNER) (1089 Points)
Replied 02 July 2009

If the remuneration is paid to a partner who is not working, it will not be allowed as deduction from the income of the firm. Hence, there clubbing provisions will not be applicable. In case the capital is introduced by the husband in the name of the wife, clubbing provisions do apply.

praveen (Chartered Accountant) (6971 Points)
Replied 02 July 2009

what i feel is if the wife gets interest then it shall not be clubbed but if she gets salary then it might be because she isnt qualified for that job. JUST A WILD GUESS>

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inder (student) (31 Points)
Replied 02 July 2009

i want to know that if any firm has been created and registered in feb 2008 but the partners have not carry on business, even a single transaction due to some missundestanding. then whether they require to file the return, prepare the dissolution deed and again registered it.

1 Like

Ankit Rungta (Student CA Final) (79 Points)
Replied 02 July 2009

Dear Inder,

They need not file any return if there income does not exceed the taxable slabs. Only companies are required to file a return even if there is no income.

However in the case of carry forward of any type of loss, there is compulsory return filing required before the due date of filing the return. This will be applicable in all the cases whether company, firm, individual, AOP, BOI, Muncipal Corporations etc. However loss on HP is allowed even if return is not filled on time.

Ankit Rungta (Student CA Final) (79 Points)
Replied 02 July 2009

Dear Gopal,

I have a birght idea for you. If you want your wife's income should not be clubbed with yours. You dont pay any salary to your wife, because when you pay salary from a concern in which you have substantial interest, then this incomes of both of you will be clubbed in the hands which recieve higher income without such clubbing.

Rather than paying the salary from your firm, you let that money reside in the firm and distribute it after paying income tax from the firm itself. The amunt such received by your wife as partner of the firm will not be clubbed in any case. It is very well mentioned in the partnership act 1932 that one of the partner can work for all other partners. Income tax act also doesnt have any problems in such, as the tax once paid on the amount by the assessment of firm will not be taxable in the hands of parnters again.

About interest, it is always provided only when your wife provides some of her capital money to the company. This will not be clubbed in any case. No worried about interest SIR!

(Guest)

Hi Gopal,

Payment of remuneration made to any partner other than working partner shall not be allowed as deduction in the hands of partnership firm u/s 40b. so no clubbing provision shall be invoked. Mr. Dharmaraju is correct to notice this point.

In case of interest, if it is earned by investing money which you provided to her then it will be clubbed with your income, if the investment is done through pin money of your wife then no clubbing provision can be invoked in such a case.

N.SARAVANAN (CHARTERED ACCOUNTANT) (33 Points)
Replied 10 September 2009

Dear friends,

I have been a partner in a firm. Now, I am going to resign from the firm. Before joining the firm I had been allotted Bank Audits with my Individual status. Now, a breaking period of 2 years for my individual status occurred due to my partnership. After resigning from the firm, whether will I be allotted on individual basis or shall I have to wait till the panel period got exhausted.

saravanan.