Facts of the Situation
Limited Liability Partnership (LLP) Assessee was an associate in a partnership firm. The assessee received its portion of the partnership firm’s profits during the pertinent assessment year. In light of the guidelines in section 10(2A), the assessee classified this share of profit as exempt and submitted its income tax return.
The Assessing Officer (AO) argued throughout the assessment procedures that the exemption requested under section 10(2A) would result in a double deduction, first in the hands of the assessee and subsequently in the hands of the assessee’s partners. As a result, the exemption was refused, and income was calculated appropriately.
The assessee appealed the order to the CIT after being upset by the decision (A). CIT (A) rejected the exemption and upheld AO’s decision. The Bangalore Tribunal was then consulted on the matter.
ITAT Passed
The Tribunal determined that section 10(2A) offers an exemption for partners who are separately assessed with regard to income obtained as a share of profits from a partnership firm.
Moreover, section 2(23) defines the term “firm” to include LLP as well, classifying LLP as a firm. The act does not forbid a partnership firm from becoming a partner in another firm.
As a result, the assessee is not at fault. Assessee may be admitted as a partner and so be qualified for section 10 exemption (2A).
