Agricultural income of the firm and the share of profit from the firm: Aggregation provision applicability in the hands of the partner

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Agricultural income of the firm and the share of profit from the firm: Aggregation provision applicability in the hands of the partner

 

             Query:

 

1.    A partnership firm owns fifty acres of agricultural land.

2.    Its only source of income is “income from agriculture” which is around Rs. 5,00,000 per annul.

3.    The firm has got four partners.

4.    The entire share income of the firm is exempt under s. 10.

5.    Whether the share of agricultural income cannot be added to other income even for rate purposes?

6.    If not, whether the income is totally tax-free both in the hands of firm and partners as well?

 

Opinion:

1.    If only income derived by the firm from partnership business is agricultural income as defined in s. 2(1A) of the IT Act, 1961 then it is totally exempt in the hands of the firm.

2.    It further follows that entire income is exempt & aggregation provision will also not be applicable.

3.    This is in accordance with the provisions of s. 10(1) of the Act.

4.    The share income of the partners from the firm would also be agricultural income which is eligible for exemption u/s 10(2A).

5.    In Such case the aggregation provision will not be applicable in respect of share of profit received by the partner from the firm.

 

 

 

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