11 November 2011
Is it mandatory to claim maximum possible partner's remuneration based on book profits even if it means that there is loss in the P & L a/c after the remuneration is claimed? Or can the partners choose to claim less remuneration? If they claim less, then what will be taxable in their hands? As per partnership deed it is mentioned that remuneration should be as per the provisions of IT Act. Also can the partners choose to claim less interest on capital ?(as per partnership deed 12%)
11 November 2011
Remuneration and interest to working partner's should be necessarily in accordance with the provisions of the partnership deed and subject to the conditions laid down in section 40(b) of the Income tax Act,1961. Vague drafting like 'should be as per the provisions of IT Act' warrants disallowance vide CBDT Circular 739 dated 25/03/1996 reported in 218 ITR (St) 131.
11 November 2011
Thank you for the reply, but my Q is that whether the partners can claim less remuneration/ interest than that mentioned in partnership deed?
CAclubindia
