26 December 2015
IF THE PARTNER HAS A DEBIT BALANCE IN THE CAPITAL ACCOUNT .DOES IT IS NECESSARY TO PROVIDE INTEREST AND SHOULD BE CREDITED TO P&L ACCOUNT AND THE PARTNERSHIP DEED IS SILENT ON THESE ISSUE..PLEASE EXPLAIN ME WITH A CASE LAW?? .
26 December 2015
Interest is provided as per the clause of the partnership deed and is allowed subject to section 40 (b). If the deed contains no clause, question of booking and claiming interest doesn't arise. But if there is a clause in the partnership deed to levy interest on credit balance and silent about interest on debit balance, naturally ITO may raise an issue following the'rule of harmonious construction' which is a vexed issue.
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