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Assessment as a Firm – Section 184


A partnership firm will be assessed as a firm in Income Tax Act if  the following conditions are satisfied

  1. Partnership is evidenced by an instrument
    Normally a partnership agreement is made for the purpose and is a valid instrument. Instrument also includes any other formal document.
  2. Individual shares of the partners are specified in that instrument
    Such instrument must specify the individual shares of the partners in the profits of the partnership firm.
  3. Certified copy of instrument should be submitted
    A certified copy of the instrument of partnership shall accompany the first return of income of the firm. 
  4. Revised instrument should be submitted whenever there is change in the constitution of firm/profit sharing ratio

If there is a failure of any conditions of section 144 in any year then no deduction of interest, salary, bonus, commission or remuneration paid to partners is allowed as deduction in that year.

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