Income Tax Law | Partnership Firms

Section 184 of the Income-tax Act, 1961: Assessment as a Firm

Section 184 laid down when a partnership firm could be assessed as a firm under the Income-tax Act, 1961. The principal requirements were a partnership evidenced by an instrument and specification of each partner's share in that instrument. The section also addressed the certified partnership deed, continuity of assessment, changes in constitution and consequences of certain assessment defaults.

Important legal update (October 2026): The Income-tax Act, 2025 came into force on 1 April 2026. The corresponding provision for assessment as a firm is section 325 of the Income-tax Act, 2025, not section 184 of that Act. Section 184 of the 1961 Act remains relevant to earlier assessment years and matters saved under transitional provisions.

1. Conditions for assessment as a firm - Section 184(1)

A partnership firm qualified for assessment as a firm if its partnership was evidenced by an instrument (ordinarily a written partnership deed) and the instrument specified the individual shares of the partners. The profit-sharing arrangement should be ascertainable from the deed. This is a tax-assessment requirement and is distinct from registration of a partnership under general partnership law.

2. Certified partnership deed - Section 184(2)

When assessment as a firm was first sought, section 184(2) required a certified copy of the instrument of partnership to accompany the relevant return of income. The provision applied to assessment years commencing on or after 1 April 1993. Electronic return procedures and document-submission requirements should also be checked against the applicable filing rules and departmental directions.

Who certifies the copy?

The Explanation to section 184(2) required written certification by all partners other than minors. If the return was made after dissolution, certification was required from the persons, other than minors, who were partners immediately before dissolution, together with the legal representative of any deceased such partner.

3. Continuity of assessment - Section 184(3)

Once a firm was assessed in that capacity, it continued to be assessed as a firm in subsequent years where neither the constitution of the firm nor the partners' shares had changed from the partnership instrument on which the original assessment was based.

4. Changes in partners or profit-sharing ratio - Section 184(4)

Where the constitution of the firm or partners' shares changed during the previous year, the firm was required to furnish a certified copy of the revised partnership instrument with the return for the corresponding assessment year. Admission, retirement or changes to profit-sharing ratios should therefore be documented in an appropriate revised deed.

5. Failure attracting best judgment assessment - Section 184(5)

Where a firm committed a failure of the kind specified in section 184(5) by reference to section 144 (best judgment assessment), the firm was assessed without deduction for interest, salary, bonus, commission or other remuneration paid to partners in computing business or professional income. The corresponding amounts were not chargeable in the partners' hands under section 28(v), as specified in that provision. This consequence is distinct from the general restrictions on partner payments.

6. Corresponding provision under the Income-tax Act, 2025

Section 325 preserves the core conditions of a written instrument and specified individual partner shares. Its subsections (2) and (3) deal with the certified instrument and certification, subsection (4) with continued assessment, subsection (5) with a revised instrument following changes, and subsection (6) with consequences of failures mentioned in section 271 of the 2025 Act. The corresponding partner-payment treatment is linked to section 26(2)(g).

For tax years beginning on or after 1 April 2026, refer to the 2025 Act and applicable rules. For earlier years, examine the 1961 Act and the repeal and savings provisions before determining the governing law.

7. Practical compliance checklist

  • Maintain a duly executed partnership deed identifying all partners and their shares.
  • Keep a certified copy of the original instrument available for the first assessment as a firm.
  • Document admissions, retirements and revised profit-sharing ratios promptly.
  • Retain the revised instrument and comply with the return-filing requirements applicable to the relevant year.
  • Respond to statutory notices and maintain books and supporting records to avoid best judgment assessment consequences.
  • Review partner interest and remuneration separately under the applicable deduction provisions.

8. Related provisions and official sources

Under the 1961 Act, sections 185, 187, 188, 188A and 189 address non-compliance, changes in constitution, succession, partner liability and dissolution or discontinuance. Section 144 concerns best judgment assessment, while section 28(v) concerns specified receipts from firms in partners' hands.

Frequently asked questions

Is a written partnership deed necessary for assessment as a firm?

Yes. Both section 184(1) of the 1961 Act and section 325(1) of the 2025 Act require the partnership to be evidenced by an instrument specifying individual partners' shares.

Must a new deed be submitted every year?

Not solely because a new year begins. The statutory continuity rule applies where the firm's constitution and partners' shares remain unchanged; a revised instrument is required when relevant changes occur.

Is section 184 still the current provision in 2026?

Section 184 belongs to the 1961 Act. For tax years under the 2025 Act, the corresponding provision is section 325. Earlier-year proceedings may continue under the saved provisions of the former Act.

This article is a general statutory guide, not a substitute for advice on particular facts or assessment years. Last reviewed: 27 October 2026.