Income
From Two Partnership Firms Is Separately Assessable Even When The Partner Is
The Same Person
This might sound to be impracticable in real life, but it is not so, as this is made possible in actual practice by proper tax planning. Thus, where an individual who is a Karta of a Hindu Undivided Family joins a partnership firm as a partner with the help of the funds belonging to the HUF, the income by way of interest on capital and working partner’s salary from such a partnership would not be taxable in his hand in an individual capacity but such income received from a partnership firm would be included in the assessment of the HUF. Of course, the share of profit from such a firm is fully exempt from tax under Section 10 (2A) of the IT Act. If the same individual were to become a partner in another concern with the help of his own fund i.e., in an individual capacity, such income would be assessable in his status of an individual. Thus, two separate assessments would be possible even where the person concerned (who has entered into partnership in two firms) remains the same. This is also possible in the case of more than two firms. The essential condition for a separate assessment of the income from a partnership firm in the hands of a
Illustration :
Mr. A is a partner in two
partnership firms known as Messrs C and Messrs D. The interest and salary
income received from the firm of Messrs C for the financial year 201 2-2013 is
say, `
2,50,000,
whereas the income received from the firm of Messrs D is ` 2,10,000. Mr. A has
joined the partnership firm of Messrs C with the help of funds belonging to the
Hindu Undivided Family and in his capacity as its Karta. Thus, the income of ` 2,50,000 would be
taxable in the assessment of the HUF of A and not in his personal assessment.
Mr. A would be liable to assessment only in respect of the sum of ` 2,10,000 being his
income from the firm of Messrs D where he is a partner in his individual
capacity.
Hindu Undivided Family is that the money must come out of the joint family funds. In some cases an individual may not have any funds of his own and might be having funds belonging to a Hindu Undivided Family only. In such a case the income received by him in his capacity as the Karta of the joint family would be assessable in the hands of the HUF only. But if the same individual were to take a loan from an outside source and were to join another partnership firm as a partner in his individual capacity, the income received by him from such firm, without any detriment to the HUF capital or property, would be assessable separately in his individual assessment. This is also illustrated with the help of an example.