QUERY:-CAN TWO PARTNERSHIP FIRM TRANSFER ASSETES TO EACH OTHER WHICH ARE CARRING ON DIFFERENT BUSSINESS WITH THE SAME PARTNERS HAVING SAME PROFIT SHARING RATIO IN THE BOTH THE FIRM?

ABOVE ISSUE WILL BE DEALT UNDER TWO POSITIONS:-

(1)    POSITION UNDER LAWS OTHER THAN INCOME TAX ACT 1961:-

*Under General/Ordinary Law, Partnership Firms are not Legal Entity and the Partners Collectively Constitute a Partnership Firm. It is merely a compendious way of describing the partners who carry on the particular business.

Above conclusion can be supported with following case laws:

1.       JESINGHBHAI UJAMSHI V/S CIT(BOMBAY HIGH COURT)

2.       RABINDRANATH DHAL  (HIGH COURT)

POSITION UNDER THE PARTNERSHIP ACT 1932:-

"Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

 Persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm-name".

      The relation of partnership arises from contract and not from status.

(2)    POSITION UNDER INCOME TAX ACT 1961:-

*Under the Income Tax Act, the position is somewhat different.

As per section 2(31) of the Income Tax Act, Person includes “Firms” as person which are chargeable to Income Tax Act 1961.

It shows that a firm can be charged as a distinct assessable entity as distinct from its partner who can also be assessed individually.

If capital assets are transferred by a firm to another firm it will attract capital gain tax, if the other conditions are satisfied.

Above conclusion can be supported with following case laws:

1.        JESINGHBHAI UJAMSHI V/S CIT(BOMBAY HIGH COURT)