LLP receiving share of Profit from other Partnership Firm eligible for Income Tax Exemption u/s 10(2A): ITAT [Read Order]

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that Limited Liability Partnership (LLP) receiving share of profit from other firms shall be eligible for income tax exemption under Section 10(2A) of the Income Tax Act 1961.

The assessee,Mulberry Textiles LLP filed return of income and the case was processed under Section 143(1) of the Act wherein the exemption claimed under Section 10(2A) of the Act was denied. The assessee had filed rectification application under Section 154 of the Act, which had also been rejected. The assessee (LLP) was deriving income from business in the form of running of plant and machineries and share of profit from partnership firm, namely M.S. Enterprises.

As per section 10(2A), the share of profit received by a partner from a firm is exempt from tax in the hands of the partner. Further, share of profit received by a partner of LLP from the LLP will be exempt from tax in the hands of such partner.

KhamruddinSyed, on behalf of the assessee submitted that the assessee was an LLP (Limited Liability of Partnership), which was a firm as per section 2(23) of the Act. He further submitted that the Act had provided an exemption clause as per section 10(2A) of the Act and was very clear that there was no double deduction claimed by the assessee. He submitted that the LLP was eligible for exemption as per section 10(2A) of the Act.

Ganesh R Gale, on behalf of the revenue submitted that the assessee was not eligible to claim exemption under Section 10(2A) of the Act as it would amount to double deduction, first in the hands of the assessee as well as in the hands of the assessee’s partners.

A single Bench of Laxmi Prasad Sahu (Accountant Member) allowed the appeal observing that,” The section 10(2A) of the Act grants exemption to a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm. The firm has been defined in section 2(23) of the Act, which includes LLP also. The Act is very clear that the LLP is to be treated as a firm. A firm can be a partner in other partnership firms. There is no restriction in the income tax Act for becoming partner by firm in other partnership firms. The assessee is an LLP and has received share of profit from other partnership firms which has been claimed as exempt income” referring the decision in Radha Krishna Jalan Vs. CIT.

To Read the full text of the Order CLICK HERE

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