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Salary and professional fees for a partner

easwaran.s (Partner) (32 Points)

15 April 2017

My wife is partner in a clinic. She is being paid professional fees for all the consultation, procedure and scanning and other work she does in the clinic. My query is will be professional fees that is paid is to be considered as partner's remuneration or partner remuneration and professional fees can be in separate heads.

Regards,

Easwar

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12 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 15 April 2017

Go by TDS deduction (under which head TDS deducted?)

easwaran.s (Partner) (32 Points)
Replied 15 April 2017

Dear Dhirahlal ji, Thank you very much for your reply. Right now we are paying only professional fee and tds is deducted under 194J. I want to if we can pay remuneration also and want to know head under which it will fall for TDS. Regards, Easwar

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 15 April 2017

Generally its not advisable to draw salary and also professional fees from the same firm, as AO may disallow either of it as expenses for the firm. You may draw it as interest or bonus as per the conditions of the deed.

For more details refer: https://www.charteredclub.com/section-40b/

Neeraj dua (Article Assitant) (54 Points)
Replied 16 April 2017

No requirement to deduct TDS on Partner's remuneration. Totally agreed with Mr. Dhirajlal If u claim both remuneration as well professional fees that could be questionable, A.o can disallow either of it.

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Madhusudhan (practice) (42 Points)
Replied 16 April 2017

professional fees is based on expertise knowledge and salary is paying based on partnership deed and it should not exceed u/s 40b.

Madhusudhan (practice) (42 Points)
Replied 16 April 2017

both are different

easwaran.s (Partner) (32 Points)
Replied 16 April 2017

Dear Madhusudhan and Neeraj, Thanks for your replies... But it is not clear. If you could share any case as example it would be of great help. Regards Easwar

Neeraj dua (Article Assitant) (54 Points)
Replied 16 April 2017

Hi Easwaran let me answer your query one by one
1. Whether partner's remuneration is chargeable to TDS???
Ans is No it is not chargeble to TDS
2. Can we pay professional fee & partner's remuneration as well??
Look it is not written anywhere in law that u couldn't pay both the expenses but as per our experience u have to prove both the expenses as A.O can ask for genuiness of expenses. Maximum remuneration allowed to partner is covered u/s 40(b). Now tell me one thing why u need to show both the expenses??? Can't u club it as partner's remuneration or there are insufficient profit for that.???
3. U r asking for relevant case law???
There were not any specific case law by virtue of which u can claim both expenses easily u have to prove it anyhow. As u can refer case law for those facts only which are apparent from records and which is predetermined or where no further ques. could asked. But in your case it is not apparent from records at all

I hope your query is reloved now.

easwaran.s (Partner) (32 Points)
Replied 17 April 2017

Dear Neeraj, We have enough profit My query is i will follow u/s 40b for partner's remuneration and also pay professional fees as per our clinic terms. Will there be any objection from the AO. Regards, Easwar

Neeraj dua (Article Assitant) (54 Points)
Replied 17 April 2017

Hi Easwaran as I advised u in my previous answers. A.O can ask anything which is relevant to his assessment but only when ur case is choose under scrutiny under sec 143. For eg. if u are paying professional charges to partner he can ask degree/diploma for such professional capacity. Second thing professional charges paid is a business expenditure and it is not covered under sec 40(b) as it is considered as expenses paid in capacity of other than partner. Crucks is A.O can question professional charges when ur case is selected for scrutiny.

easwaran.s (Partner) (32 Points)
Replied 20 April 2017

Hi Neeraj ,

Thanks for your reply.

The issue is like this : My Wife is is a partner of a clinic which is a partnership firm, she receives salary. There is some profit which is payable after expenses.

Also in individual capacity She is in receipt of professional charges for the work done at the clinic. She is qualified doctor.

For example her professional fees payable is 30000 and profit is 10000

If she is paid her professional fees and profit together under 40b where she is eligible for 60% of the profit .she receive only 24000. which is lesser than her professional fees.

Regards,

Easwar