assessment of firm

[Asked by Guest]

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

Carryforward of firm losses limited by retiring or deceased partner's profit share; excess lapses and does not apply absent retirement or death.
Section 78 requires reducing carried forward firm losses by the retiring or deceased partner's share of profit in the relevant year; any excess of that partner's prior loss share over his current-year profit share lapses and cannot be set off. The restriction applies only where retirement or death has occurred and does not apply merely because of admission of a partner or a change in profit sharing ratio.