assessment of firm

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1. Suppose the partnership firm(comprising of three partners A,B,C ; PSR=1:1:1) has profit of 330000 in py2010-11,cf loss is 300000(PSR =1:1:1),one of them retired in the current year on 31/12/2010,so his share of profit for the current year becomes 82500.Now loss of the retired partner cant be carried forward but can the excess loss of retired partner i.e. 17500(100000-82500) of other partners be set off against profit of other remaining partners in the current year???????

2.Also whether sec 78 would apply to change in constitution due to change in psr as the wordings used in sec 78 is retired or deceased partner.

AI Summary

Excess Loss in Partnership Not Set Off Against Remaining Partners' Profits Under Section 78 of Income Tax Act. A query was raised regarding the treatment of losses in a partnership firm when a partner retires. The firm had a profit of Rs 330,000 and a carried forward loss of Rs 300,000. One partner retired, and their share of profit was Rs 82,500, leaving an excess loss of Rs 17,500. It was clarified that this excess loss cannot be set off against the profits of remaining partners as per Section 78 of the Income Tax Act, which applies to changes in firm constitution due to partner retirement or death, but not to changes in profit-sharing ratios.