Which itr is used for firm's return

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 I have a Consultancy firm work as commission agent Tata teleservices which has income for F.Y 13-14 a sum of Rs:- 124689 & TDS was deducted by TATA company u/s 194H Rs:- 12470/- for F.Y. I just wanna know which ITR should I choose for firm's return & can i get as a refund by filling ITR, bcoz I came to know if firm has income even a Rs:- 1 then Tax will be deducted...isn't there any exempted limit for firm or not.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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16 August 2014 there is no exemption limit. kindly file itr5.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 Unfortunately no exemption limit is available to Firm however you may reduce the tax liability by calming salary paid to working partners (if it is provided to partnership deed).

make books of accounts and file ITR 5

Rupesh Jain

Rupesh Jain (Expert)
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16 August 2014 if you are partner ship firm then you have to file the return in ITR-5 with books of accounts.

if your Prop. then file ITR-4

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 1. Rupesh Jain, its proprietor ship firm, No working partner with me ? No salary is given to employees working under me as per deeds....Can I claim refund as TDS was deducted above, If I file ITR-4 would I have to keep books of Accounts.

2. In other Case A partner was working with me, but he is ill for last 7 months as all efforts done by me...If I show him to be in work for 12 month in my income as salary paid to him, Can I deduct the tax liability & get refund..

Plz clarify it.......

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 If it is proprietorship firm, then ITR 4

If it is proprietorship firm, there is no question of partner. If he is employee, you pay salary.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 If your final tax liability is less then TDS deducted on behalf of you, you can claim refund.

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 Umesh Ji, Its a partnership firm, As I already said my partner was ill for last 7 month as no salary was taken to him. I want to as If I show in my return salary given to him to reduce tax liability Can I do it? 2nd would I hve to prepare books of Accounts on compulsory basis as during whole years firms income is 124689. Is it compulsory to file return as TDS was already deducted if I don't file would be any notice for non filling ?

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 I suggestion to you, plz decide what type of firm is it? whether it is partnership or proprietor.

You said to Rupesh a proprietorship firm
now you are saying a partnership firm

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 we all experts manage some time from our schedule to solve the problems of person like you and to make awareness. You should not take us for granted.

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 Sir, I finally said Its a partnership firm, actually My partner was ill he was out of work for a long period then I thought it should be a proprietorship firm bcoz only I am working in firm., but no changes was made by us in partnership deed. so its a partner ship firm, i wanna ask if I show salary given to him & show that he counitued with his work...so can we claim deduction to reduce tax liability ? I just want to ask this...only......

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 If your partnership deed has clause for payment of salary to working partners you can.

yes you can pay salary to him even though he is not able to come to office for work.

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 Ok Thanku Sir.......In that case I can get the refund after showing salary as deduction.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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16 August 2014 1. determine your tax liability
2. if your tax liability is less than your TDS, you will get refund.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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16 August 2014 Umesh bhai,

I will have to disagree on this salary point.

Given that the partner is not actively involved in the business, section 40(b) disallowance should be attracted. You may also refer to explanation 4 to the aforesaid section, wherein working partner has been defined to mean an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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18 August 2014 Nikhil Bhai, I completely disagree with you. Working does not mean that he has to come to office.

Other point is if he is not able to work for sometime due to illness does not amount that he is not actively involving the affair of firm.

Having said that different views may be applied as taxation is not rocket science.

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2014 Sir, I recently read salary part of firm u/s 40(B), here found salary to be paid to working partner will be allowed as deduction, no details are added for salary paid to non working partners are allowed as deduction. As I m getting confused as Mr. Nikhil said the same point I read....plz explain......

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 August 2014 Umesh Bhai, I agree with the difference of opinion. But the intention of the Act appears to be that persons not involved in the active management should not be paid salary. Your own submission that the person is ill rather proves that he is not actively involved and the non-involvement was severe enough to make querist wonder if its a partnership firm anymore or not. The question is not at all based on based whether the said partner attended office or not. The question is whether he is actively involved in the business or not.

There could have been crystal clear interpretation had ITD just disallowed the deduction for sleeping partners. But by disallowing for non-active involvement, it leaves option open for disallowing on grounds of incapacity too (and as it always is, it shall be left to assessee to prove otherwise)

CA UMESH DULAL

CA UMESH DULAL (Expert)
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18 August 2014 This situation reminds me the case of my friend who could not attend the office for almost 6 months due to accident and the firm paid salary. In my opinion, the partnership firm never came to end nor he became sleeping partner during the period.

If I have to give the opinion in this type of case, I will always go for what I have said in earlier answer.

However, If I was an AO, I will upheld the view of Nikhil Ji.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 August 2014 I agree Umesh Bhai. Partnership firms doesn't come to an end. I was just stating what the querist thought about his own firm.

See I have this habit of taking positions wherein at assessment stage itself we are able to manage things. There are hundred ways to prepare accounts to circumvent tax regulations in perfectly legal way. So, I always first think about what an AO will do.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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18 August 2014 In my case, If there is more than one views, I will go by most liberal view that is beneficial to assessee after consulting with assessee whether he will take some risk or not.