Clubbing of two business entity

[Ramesh Patel]

We are registered under excise. we are mfg product 'A'. We have four partners Say Z Y X W Since we have spare place in the same factory we decided to mfg product 'B'. by regestring new firm with parter Z and Y. The existing firm will revise the layout paln of present factory and remove the place allocated to new firm. Input required for both products are same. Is there chance of clubbing two business entity. What is criteria of clubbing two business entity.

AI Summary

Two Firms with Common Partners Not Clubbed for Tax Purposes; Separate Entities Despite Shared Location and Inputs. A business entity inquired about the potential clubbing of two firms, both involved in manufacturing different products but using similar inputs. The existing firm, with four partners, planned to manufacture a new product by registering a new firm with two of the same partners. The response clarified that the two firms are separate entities despite having common partners and operating in the same location. Clubbing is unlikely unless there is evidence of tax avoidance. The response also highlighted the need to examine the relationship between the partners and the rationale for establishing the new firm.