Notification of the firm's assessment
When a registered firm is evaluated or an unregistered firm is evaluated under the terms of a clause in section 183 for the assessment year beginning on April 1st, 1992, or any earlier assessment year, the assessing officer must give the firm written notice of the amount of its total income evaluated and the allocation of that amount among the various partners. A firm is an organisation made up of two or more people who got together to run a business and split the earnings.
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According to Section 4 of the Partnership Act of 1932, a partnership is "a link between persons who have agreed to share the benefits of business carried on by each or any of them acting for everybody." The people who have decided to work together are referred to as "Partners" individually and as a "Firm" collectively. They abide by a document known as the "Partnership Deed." Similar to articles of association, trust deeds for corporations, and trusts, respectively, a partnership deed governs partnerships.
Conditions That Must Be Met By A Company To Be Considered As Such (PFAS):
The taxation and assessment of Firm are governed by Section 184 of the Income Tax Act of 1961. For a company to be classified as a firm, it must meet these requirements:-
A document called a "Partnership Deed" shall serve as proof of the Firm and it must be put in writing; it shouldn't be done verbally or by action; the following provisions may be included in the deed: Name of the Firm, Address, Type of Business, Date of Business Inception, Duration of Partnership (if any), Capital Provision, Profit-Sharing Ratio, Compensation Payable to Partners, Interest Payable to Partners, any arbitration clauses, withdrawal rights, the ability to operate a bank account, the way profits are calculated and how books of accounts are kept, the management of the business, partner responsibilities, the value of goodwill, increases in capital, the exclusion or addition of partners, and any other clauses that the partners have decided upon.
The Partnership Deed must specify each partner's individual portion. Partners will split the loss based on their respective profit-sharing percentages. However, in the event of a minor, the Deed should expressly state how the firm's losses would be distributed among the major partners. With the firm's first return, a certified authentic copy of the partnership deed must be included. All partners would sign the Deed (major partners). Authorised Representative may submit the deed and their Authorisation Letter. A new copy of the Deed must be included with the return in the event that the firm's organisational structure, profit sharing percentage, partner compensation, or payment of interest, among other things, changes.
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