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44 ad and partnership income after salary and interest

nvp (CA Practice ) (38 Points)

30 October 2017

Pl advice on following in case of Partnership firm in the light of 44 ad for AY 2017-18

Turnover - 180 lacs

Profit before Salary and Interest to Partners - 83.00 lacs (46 %)

Partner Interest - 22.00 lacs

salary to partner - 40.00 lacs

Profit after Salary and Interest to Partners - 21.00 lacs (12 %)

Question - Whether return can be filed U/s 44 AD with Rs. 21.00 lacs profit.

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39 Replies

Nishant shah (AUDIT ASSISTANT) (302 Points)
Replied 30 October 2017

definitely

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 30 October 2017

" Whether return can be filed U/s 44 AD with Rs. 21.00 lacs profit.?"

No.

Yes......... with 83 lakhs profit.........

1 Like

RAJA P M ("Do the Right Thing...!!!") (127387 Points)
Replied 30 October 2017

Dear Mr Dhirajlal Rambhia Sir.,

The profit is above 8%....?
Then why... " Whether return can be filed U/s 44 AD with Rs. 21.00 lacs profit.?"

No.

Yes......... with 83 lakhs profit........

1 Like

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 30 October 2017

Section 44AD(2) prior to Finance Act 2016 amendment, specifically mentioned that while determining the income deemed to be profits and gains of business under Section 44AD of the Act, deduction under Section 40(b) shall be allowed subject to the limits specified.
Therefore, Section 44AD of the Act which appeared to be a separate self-contained code, specifically used the term contrary in its non-obstante clause so as to enable the eligible assessee to avail the deduction under Section 40(b) of the Act prior to Finance Act 2016.
The new Section 44ADA of the Act does not provide for any deduction while determining the presumptive profits and this may be considered the reason for the absence of the word contrary in the non obstante clause.

One may contend that pursuant to deletion of proviso to Section 44AD (2) by Finance Act 2016, Section 40(b) which specifies the amounts not deductible has been deemed to have been disallowed.

Thus. whatever salary or remuneration to be paid or payable has to be added back to the profits of the firm.........

RAJA P M ("Do the Right Thing...!!!") (127387 Points)
Replied 30 October 2017

Dear Sir.,

Then what is the exact Solution for above said query...

As per sec 44AD we ll show the profit 8 %... No need accounts, No need books of accounts maintain and no need worries by sec 44ad...

But, why these conditions...?
Our (assessee) conditions is 8percentage ll be payable. Also we ll pay... Then we can use our before amount is anything as salary, remuneration, interest and etc.,

Oh Confusion to Big confusion.... 😭😭😭😭😭😭🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏🙏

RAJA P M ("Do the Right Thing...!!!") (127387 Points)
Replied 30 October 2017

Please give the Solution for the Query Sir... Also I get the knowledge....

Then How the ll run his life...???

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 31 October 2017

My Dear ........

How can you justify......... when a (partnership) firm declared profits of Rs. 21 lakhs....... but pays interest to partners at 22 lakhs along with salaries of Rs. 40 Lakhs !!!

So, there could have been confusion..........

To remove that confusion, in Finance bill 2016, the section was amended that the partners' salary and remunerations are not allowed before presumptive assessment !!!

Otherwise it will be added back to the profit.

Earlier the salary & interest were taxed in the hands of partners..... which now taxed in the hands of firm, ........... that's all......

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 31 October 2017

And answer to the query is already given that section 44AD is applicable but not at profit declaration of 21 lakhs.......

RAJA P M ("Do the Right Thing...!!!") (127387 Points)
Replied 31 October 2017

Good Morning Dear Sir.,

My doubt is.,

We show the profit 8 percent and pay the Tax. The Dept is satisfied for the profit...
Then the before the amount why not we can use ourselves....???

Also how is understood above all your reply...

U/s 44ad not applicable for remuneration and interest before profit...!!!
The Querist / me Show the profit 83lakhs and pay the Tax... After paying tax we can use taxable amount as remuneration and Interest....

MURALIDOSS (INCOME TAX PRACTITIONER) (1302 Points)
Replied 31 October 2017

Ji.. , How it will reflect in partners individual assessment? Again they have to add interest and salary as income for them and pay tax?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 31 October 2017

' The Querist / me Show the profit 83 lakhs and pay the Tax... After paying tax we can use taxable amount as remuneration and Interest...."

Yes, after payment of tax on 83 lakhs......... firm can distribute the tax paid funds/capital to partners without any objection from the department.............. Objection would have arised only if firm paid tax over 21 lakhs and distributed 83 lakhs !!!

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160835 Points)
Replied 31 October 2017

Originally posted by : MURALIDOSS
	Ji.. , How it will reflect in partners individual assessment? Again they have to add interest and salary as income for them and pay tax?

No, after the payment of tax over the profits of firm......... when the same is distributed amongst partners, by whatever means, it would be tax-free.