LLP is eligible for exemption from profits received from firm in which it was a partner: ITAT

Case Details: M/s. Mulberry Textiles LLP Vs. ITO Wad-7(2)(3) - [2023] 147 taxmann.com 267 (Bangalore-Trib.)

Judiciary and Counsel Details

• • Laxmi Prasad Sahu, Accountant Member
  • Khamruddin Syed, A.R. for the Appellant.
  • Ganesh R. Gale, Standing Counsel for the Respondent.

Facts of the Case

Assessee, a Limited Liability Partnership (LLP), was a partner in a partnership firm. During the relevant assessment year, the assessee derived its share of profit from the said partnership firm. Considering the provisions under section 10(2A), the assessee treated such share of profit as exempt and filed its return of income.

During the assessment proceedings, the Assessing Officer (AO) contested that the exemption claimed under section 10(2A) will amount to a double deduction first in the hands of the assessee and then in the partners of the assessee. Thus, denied the exemption and computed the income accordingly.

Aggrieved by the order, the assessee filed an appeal to the CIT(A). CIT (A) upheld AO’s order and denied the exemption. The matter then reached the Bangalore Tribunal.

ITAT Held

The Tribunal held that section 10(2A) provides exemption with respect to income received as a share of profit from a partnership firm in the case of any person who is a partner and separately assessed.

Further, section 2(23) defines the meaning of a firm which includes LLP also, thereby treating LLP as a firm. There is no prohibition under the act whereby a partnership firm cannot be a partner in another firm.

Therefore, there is no fault on the assessee’s part. Assessee can be admitted as a partner and thus eligible for exemption under section 10(2A).